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2/28/2009

All the way, DBS-Citibank!

Just as I raised my hope for a 7% dividend, it fell flat in my face. And my estimate was way way off. The 7% would have given a return of US$482m pa. GIC could have the money back in no time. Now it is all gone. But don't worry, there is a better and more promising deal. The conversion price which was US$26.35 was watered down to US$3.25 and the conversion to ordinary shares will give GIC an 11% stake in Citibank, the second largest shareholder next to the US govt. And there are more promises along the way. If the market recovers and Citi's price shot up, we could reap much higher returns. If the market plunges and Citi became insolvent or be nationalised, gone with the wind. But the second 'IF' is only a big If. No need to worry about that. In the long term everything will be fine. Now the more juicy part. If our US$6.88b can give us 11% stake in Citibank, it means that the whole bank can be had for no more than US$70b. This is definitely very affordable. Shouldn't GIC launch a general take over of Citibank and merge it with DBS to become an international giant bank? And another piece of good news. There are so many good news and things are looking much rosier. What's that? Oh, Citibank's share price fell to US$1.55. This simply means we could have the bank for less than US$35b. And with already 11% in our hands, US$30b should do the trick. I don't think the US govt will object if we let Chip Goodyear to negotiate the deal. The US govt must be more comfortable with Goodyear in charge. Wow, I think we have all these planned in advance. Great foresight and pro active thinking and decision making. We must have see all these coming. Go for it GIC! Take Citibank under our wings, but make sure the top management are Singaporeans. The Americans can be co opted as advisers. I will definitely bank with DBS Citibank.

9 comments:

Dog said...

The gahmen should, publicly and sincerely THANK all sporeans for the patience and tolerance shown them these 40+ years. It is time for them to stop taking for granted that sporeans will just kpkb over the grievious abuse of public trusts.
The mm has been taking us too much for granted. High-time he regrets.

Sunrise said...

Redbean... nationalisationn of Citi is a matter of time and not "IF". They are just too debt laden. The fact that major funds are dumping their holdings in Citi is telling you they had already known the ending and just waiting for the fat lady to sing. CLosing price was $1.50!!!

Unfortunately I think what's left of the money in Citi may soon be diluted to the point where it wouldn't be enough for a bowl of ice kachang.

Anonymous said...

laugh. why would we want to take over citi? Their debts are worth more than their assets. Look, I will give u my negative equity house and my mortgage for 5 dollars.

Anonymous said...

I never banked with Citibank because I am a small fry.

Back in the early seventies they called Citibank the 'rich man's bank'. They were so arrogant in their choice of clients that they couldn't be bothered with small savings account of $5K to $10K. Some of my colleagues who had accounts with them of less than $5K were told to top up or close their accounts.

So poor guys like me had to depend on banks like Four Seas Communications Bank, Overseas Union Bank etc. Citibank was too big a name for most people. What a difference now!

Lost Citizen

redbean said...

hi sunrise, welcome to the blog. it is possible for citi to be nationalised. then the USA will become the United Soviets of America.

but if we make a general offer and take it over, then we can save it from being nationalised. but they need to work out the existing liabilities and debt of citi.

we are lucky POSB is being privatised. otherwise no bank to keep my $200. but they still charge those with less than $1k or so with a fee for having too little money. those with little money are a liability to the banks.

Anonymous said...

Hahah.. nice light read. You funny guy. Thanks...

Truth is though, no one knows the true value of Citi's books... (negative or positive). So no one dares do it..
CHEAP THINGS NO GOOD, GOOD THINGS NO CHEAP.

redbean said...

well, according to official reports, citi has a debt of US$27b. this is really peanuts. buy it over, restructure the debts, write off, renegotiate with debtors, may still worth taking over.

now there are suggestions of just buying over the profitable asia operation. this could be cheaper.

Anonymous said...

the reason they keep taking us govt money is because they have a lot of iliquid assets. Why are they iliquid? why can no one value the bank? Everything will have a buyer at some price right.

being unable to value, is another way of saying that if one sold the asset on the market, the bank is bankrupt.

They keep a lot of assets on their books that cannot be sold at anything like the price they are holding it.

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