Business Blog: Hoover’s Business Insight Zone

Almost lost in the weekend shuffle as Chuck Prince departs Citigroup is this little gem from the company’s other Sunday press release:

Citigroup Inc. announced today significant declines since September 30, 2007 in the fair value of the approximately $55 billion in U.S. sub-prime related direct exposures in its Securities and Banking (S&B) business. Citi estimates that, at the present time, the reduction in revenues attributable to these declines ranges from approximately $8 billion to $11 billion…

Two things:
1. Whether the actual figures come in at the top or the bottom of the range, that’s a lot of money. A LOT — even for the mighty Citi.
2. It’s telling that, this “late” in the game, even a financial organization as sophisticated at Citi’s can’t draw a more precise bead on the figure than that. I mean “8″ doesn’t sound like it’s so far from “11,” right? And then you remember that we’re talking about billions.

Expect more bad news for all Wall Street firms. The subprime pain is not over, and it may be a long way from being over.

(Thanks to Management Turnover as Change Agent for pointing this out.)

Mid-morning update = more links:

David Gaffen of MarketBeat:

…Deutsche Bank’s Mike Mayo says management now appears to be in “a period of CEO-limbo,” which is “not only is troubling for morale but also unusual given that the outgoing CEO made several management changes in the investment bank only 3 weeks before his exit. Why did the board allow such changes to be made when there was a chance that the CEO would leave?”

(You’ll recall that Mike Mayo was the indignant analyst who grilled Mr. Prince during Citi’s last earnings call.)

Gregory Corcoran of Deal Journal:

…So too did Citi have to choose the right number, in this case, not too low to leave investors expecting more later but not too high to scare them either — and leave investors feeling that the bank didn’t have a handle on its own numbers. Clearly, the market didn’t expect a write-down as large as the one Citi disclosed….

Michelle Leder of Footnoted:

…With all of this other stuff going on, it seems interesting that Citi chose today to file its latest Q which used the word sub-prime 53 separate times in the 100-plus page filing. Compare that to 10-Q that Citi filed back in August, which only mentioned the S-word twice. Was it really not a problem worth much discussion only three months ago?

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