Dear Valued Visitor,

We have noticed that you are using an ad blocker software.

Although advertisements on the web pages may degrade your experience, our business certainly depends on them and we can only keep providing you high-quality research based articles as long as we can display ads on our pages.

To view this article, you can disable your ad blocker and refresh this page or simply login.

We only allow registered users to use ad blockers. You can sign up for free by clicking here or you can login if you are already a member.

Why Citigroup Inc. (C) Is Making Me Nervous

Page 1 of 2

Whether you’re in a personal relationship or a business relationship, no one likes mixed signals. But that’s exactly what Citigroup Inc. (NYSE:C) is sending to its investors regarding plans for handling cash reserves set aside for the bank’s troubled mortgages.

Bad banks for bad mortgages
Reuters is reporting that John Gerspach, Citigroup’s Chief Financial Officer, told investors at a conference this past Tuesday that the bank would begin releasing these reserve funds “sooner rather than later.” The bad mortgages, a leftover from the financial crisis, were spun off from Citigroup into another entity called Citi Holdings, which lost $3.7 billion last year.

Citigroup Inc (NYSE:C)But not even one month ago, Gerspach told investors on the bank’s fourth-quarter earnings call that Citigroup was hesitant to release these reserves until the country had more completely resolved the fiscal cliff — that the way it had been settled was a case of “kicking the can down the road.”

If you build it, they will come
But since nothing has changed from a political perspective regarding the fiscal cliff in the past month, why the sudden change of heart regarding Citigroup’s cash reserves? Has something else of significance changed? Or is Gerspach just trying to make investors hopeful and happy, with no reality-based reason for doing so?

Gerspach did hint that perhaps by settling ongoing claims with Fannie Mae and Freddie Mac, Citi Holdings might be able to break even sooner rather than later, but he gave no specific indication how or whether this might happen. Bank of America Corp (NYSE:BAC) made a $10 billion-plus settlement with Fannie Mae just last month, and many of that bank’s investors are hopeful that this might exorcise the last crisis-related demons B of A has to deal with.

So maybe Citigroup has some similar deal in the works, and this is a roundabout way of leaking that info to investors. The bank’s stock did finish the day 2.78% higher yesterday, so if boosting investor confidence and share price was the plan behind Gerspach’s comments, it worked.

Page 1 of 2
Loading...