Quick Hits: Citi's Leverage Grows Despite Dumping Assets
Brief scrutiny of today's headlines.
Citi's new CEO, Vikram Pandit, has spun off units, cut the dividend and handed out pink slips to preserve shareholders' precious equity. The moves, however, have not offset the erosion of its capital base caused by declining asset values.
The company announced yesterday, ahead of this morning's earnings release that it's selling CitiCapital, a commercial lending operation with 160,000 customers in North America and $13.4 billion in assets, to General Electric (GE). The two companies didn't disclose the price of the acquisition, but GE expects the new division to be a "significant growth opportunity."
Despite efforts to shed assets and reduce exposure to risky mortgage-backed securities, Citi's leverage grew in the fourth quarter of last year to 19:1, up from 18:1 the quarter before. It looks like bean counters in the bowels of the company's accounting department are still trying to lever the struggling bank out of its problems.
For more on the banking industry, check out Hoofy and Boo's always astute analysis:
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