Citigroup Inc shareholders, cheered by a US$5.1 billion first-quarter loss that wasn’t as big as some analysts forecast, face growing concern that the bank may have to sell assets, reduce the dividend and attract outside investment to bolster capital.
Citigroup’s so-called Tier 1 capital ratio — a measure of its ability to withstand loan losses — fell to 7.7 percent at the end of last month, the New York-based bank said on Saturday. Citigroup says it needs a 7.5 percent ratio to provide a margin of safety and preserve its credit ratings.
The bank’s shares surged 4.5 percent yesterday after it reported US$16 billion of asset writedowns during the quarter, less than some observers predicted. The writedowns burned through much of the US$30 billion in capital Citigroup had raised since late last year, leaving it vulnerable to further charges and loan-loss provisions.
“We’re in a recession, they have a huge consumer book and there’s huge double-digit-billion provisions that they’re going to have to take in the next 18 months to two years,” CreditSights Inc analyst David Hendler said. “They’re undercapitalized for their risk.”
A weakening US economy and rising consumer delinquencies have forced chief executive officer Vikram Pandit and chief financial officer Gary Crittenden to back away from assurances earlier this year that the bank didn’t need to raise more capital.
In January, Crittenden said Citigroup “stress-tested” its assumptions under “multiple recessionary scenarios.”
Asked on Friday if the bank might seek an additional infusion, Crittenden said: “You can never say never.”
“This is a difficult business environment,” Crittenden said in a conference call with analysts and investors. “There are no easy solutions here, no silver bullets.”
Citigroup raised capital in December and January by selling stakes to investment funds controlled by foreign governments including Abu Dhabi, South Korea and Kuwait.
The infusion helped boost Citigroup’s Tier 1 ratio to 8.8 percent by Jan. 22 from 7.1 percent at the end of the year.
The first-quarter loss was second in size in the bank’s 196-year history only to the record US$9.88 billion reported in the previous period.
It wiped out so much capital that Citigroup may have to find outside investors or cut the dividend, Hendler said.
Intel Corp chief executive officer Lip-Bu Tan (陳立武) is expected to meet with Taiwanese suppliers next month in conjunction with the opening of the Computex Taipei trade show, supply chain sources said on Monday. The visit, the first for Tan to Taiwan since assuming his new post last month, would be aimed at enhancing Intel’s ties with suppliers in Taiwan as he attempts to help turn around the struggling US chipmaker, the sources said. Tan is to hold a banquet to celebrate Intel’s 40-year presence in Taiwan before Computex opens on May 20 and invite dozens of Taiwanese suppliers to exchange views
Application-specific integrated circuit designer Faraday Technology Corp (智原) yesterday said that although revenue this quarter would decline 30 percent from last quarter, it retained its full-year forecast of revenue growth of 100 percent. The company attributed the quarterly drop to a slowdown in customers’ production of chips using Faraday’s advanced packaging technology. The company is still confident about its revenue growth this year, given its strong “design-win” — or the projects it won to help customers design their chips, Faraday president Steve Wang (王國雍) told an online earnings conference. “The design-win this year is better than we expected. We believe we will win
Power supply and electronic components maker Delta Electronics Inc (台達電) yesterday said it plans to ship its new 1 megawatt charging systems for electric trucks and buses in the first half of next year at the earliest. The new charging piles, which deliver up to 1 megawatt of charging power, are designed for heavy-duty electric vehicles, and support a maximum current of 1,500 amperes and output of 1,250 volts, Delta said in a news release. “If everything goes smoothly, we could begin shipping those new charging systems as early as in the first half of next year,” a company official said. The new
SK Hynix Inc warned of increased volatility in the second half of this year despite resilient demand for artificial intelligence (AI) memory chips from big tech providers, reflecting the uncertainty surrounding US tariffs. The company reported a better-than-projected 158 percent jump in March-quarter operating income, propelled in part by stockpiling ahead of US President Donald Trump’s tariffs. SK Hynix stuck with a forecast for a doubling in demand for the high-bandwidth memory (HBM) essential to Nvidia Corp’s AI accelerators, which in turn drive giant data centers built by the likes of Microsoft Corp and Amazon.com Inc. That SK Hynix is maintaining its
RSS