One person at least has full confidence in Citigroup, notes Lex. Unfortunately, many more do not. Investors on Thursday brushed aside Prince Alwaleed bin Talal’s move to raise his stake in the beleaguered bank from 4% to 5%. Citi’s stock, down 80% this year, dropped below $5 a share as the market fretted about the bank’s solvency. An unprompted vote of support from Saudi Arabia for Vikram Pandit, chief executive, only heightened concerns about Citi’s management, strategy and future earnings power. Fundamentally, investors worry that Citi lacks capital to absorb mounting loan losses and writedowns to asset-backed securities, despite previous capital raisings. The bottom line, however, is that the market is no longer interested in Citi’s insistence that it is in much better shape than 11 months ago. Nor is there interest in Prince Alwaleed’s faith in universal banking. Investors, anticipating a move from regulators, are instead behaving as though Citi is cursed. The group has tried all week to address the market’s fears. Now it is time to sit and wait. And perhaps to burn sage to remove the hex.

This entry was posted by Gwen Robinson on Friday, November 21st, 2008 at 5:46 and is filed under Capital markets. Tagged with citi. Edit this entry.