Monday, May 12, 2008

Citi's shares are overvalued - Meredith Whitney

In the clearest sign yet, that the global credit crisis is easing global bond issuance jumped 42 percent in April to $1.1 trillion the most since June 2007. The trillion dollar mark in sales was reached only four times since 1995. Financial stocks rebounded today after last weeks sell off but Meredith Whitney, analyst at Oppenheimer, thinks that shares of Citigroup are still overvalued. Her comments come after Vikram Pandit outlined plans to get rid of $400 billion of assets over the next three years at a Citigroup analyst and investor meeting on May 9.

Here is what she had to say in a Bloomberg interview:
Citigroup Inc. Chief Executive Officer Vikram Pandit faces an "impossible feat'' in turning around the biggest U.S. bank as it faces "seismic'' costs to restructure.

"They don't have the revenue power, they don't have the earnings power in so many of their businesses. Even Stephen Hawking could not pull this off''

"The credit outlooks and the loss assumptions for banks across the board are way too low. The outlook for earnings across the board is going to be much worse than people expect.''

"Dividend cut is a foregone conclusion" "Citi is one of the most overvalued among the financial industry"

She also comments about the new CEO Vikram Pandit:
"The most revealing thing to me is ...Vikram did not know the deposit base of the bank. That is your core franchise for most bank managers. Ken Lewis would rather die than not knowing their deposit base."

"The presentation was glaringly light on actual mechanics, and run-rate earnings figures seemed to cherry pick revenue and credit scenarios from recent years...Pandit set no delivery date as far as execution."

click for video

update: Tue May13, 11:00 a.m.
Oppenheimer's Whitney cut profit estimates for the four biggest U.S. securities firms in a note dated yesterday, citing weakness across their businesses. Whitney reduced her second- quarter projections by 41 percent on average and by 48 percent for the full year.

video: Citi's Pandit Faces `Impossible Feat,' Whitney Says
Oppenheimer & Co. analyst Meredith Whitney

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