Monday, January 14, 2008

Holes In The Balance Sheet

Bloomberg (01.14.08):
"Citigroup Inc., Bank of America Corp. and Merrill Lynch & Co. may report their worst-ever quarter, beset by $35 billion of writedowns that threaten to crimp profit through 2008.

The losses have depleted the banks' capital, forcing New York-based Citigroup and Merrill to seek more than $13 billion from foreign investors [ed. - Merrill, $4 billion from Kuwait; Citigroup, $13 billion from China and Kuwait], and hobbled their ability to make new loans.

Wall Street's $35 Billion Writedown Puts Squeeze on '08 Profits

"Other sources of fees, including credit cards, are also in jeopardy as the U.S. economy slows, said CreditSights Inc. analyst David Hendler, who estimates Citigroup, Bank of America and Merrill won't earn more this year than they did in 2006."

Ahhh, Citigroup. CNBC (01.14.08), via Eschaton:

"Citigroup plans to announce a writedown of as much as $24 billion and layoffs of up 24,000 due to subprime and credit-related losses, CNBC has learned."

Citigroup Layoffs Could Reach 24,000 This Year

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Anonymous loki said...

Context, Knob Man, is what I haven't yet found. Seems to me that given Citi's yearly numbers, billions here and billions there eventually must add up to real money. But what is that point that it becomes real money to Citi, that's what I'm asking myself.

Looks like Citi's revenues last year were about $145bn, net income about $21bn. So if a $35bn write down occurred during that year, is it basically simple math? Reduce revenue and income by the full write down amount? Or is there a formula? I imagine there are tax ramifications or something that might mitigate the full impact, or someway to account for the write down so that it's not real money?

11:30 AM  
Blogger knobboy said...

I'm assuming the writedowns are to the balance sheet side of things, and wouldn't be on the income statement.

You'd figure at some point in time, they had to shell out some cold hard to buy the assets to begin with.

Now, the assets are worth $35 billion less than what they paid for 'em, and the prospects of 'em being worth even less are much more real than anything else.

Someday, they're gonna have to unload the things. Assuming they could find a buyer!!

1:50 PM  
Anonymous loki said...

Hmmm. So thats $1.4 trillion total assets...
Thanks for indulging me. I have some learnin' to do.

2:28 PM  
Blogger knobboy said...

Crazy, ain't it? Here's the quarterly numbers, which are even more up to date.

See how their net tangible assets have steadily declined over the past four quarters? I'd wager that therein lies the write downs. At least the ones they've had to fess up to.

And by golly if it ain't over yet!

How these morons ever got to manage so damned much money is beyond me.

9:42 PM  

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