Citi plans to go it alone, no more government aid
Citigroup's (C) Chairman Richard Parsons made it clear Thursday that he doesn't intend to seek any more capital injections from the government and is certain Citigroup will remain in private hands. When asked by Reuters if Citi needs more government bailout money, Parsons said, "No, I think actually, particularly with the latest conversion ... Citi is actually one of the better capitalized banks in the world."
What Parsons didn't emphasize in the interview though was the fact that the U.S. government now has a 36 percent stake in the bank since the conversion of $25 billion of preferred stock to common stock. To get to that level of capitalization, Citigroup needed $45 billion in bailout fund from the government. But, Parsons did say he does not think that the government is planning to nationalize any banks.
Citigroup executives certainly share his view. In the last week they gained $2.2 million in paper profits in nine days buying beaten down Citi stock, which fell below a $1 on March 5. According to Bloomberg, director Roberto Hernandez saw a 47 percent increase in his Citi stock purchase from March 2 through yesterday's close. Chief Executive Officer Vikram Pandit told employees this week that Citi is having its best quarter since 2007. Investors who bought the stock near its high of $50.26 in May 2007 lost about 95% in value. Citi closed yesterday at $1.67.
Hernandez bought 6 million shares on March 2 at an average price of $1.25, according to regulatory filings. With the shares close of $1.52 on March 10, he had a paper profit of $1.7 million, Bloomberg calculated. Other major purchasers of Citi stock include Latin America Chief Executive Officer Manual Medina-Mora, who bought 1.5 million shares, Vice Chairman Lewis Kaden, who bought 100,000 shares and Comptroller John Gerspach, who purchased 65,000 shares.
Hernandez plans to step down from Citi's board after the annual meeting in April. He does expect to keep his role as non-executive chairman of the company's Mexican Bank, Banamex.
Lita Epstein has written more than 25 books including Reading Financial Reports for Dummies and the Complete Idiot's Guide to Value Investing.