December 28, 2007

Citi to sell assets

Heard on the Street -
The article in the Wall Street Journal reports that Citi is planning to sell assets to shore up capital. It is a very logical approach for the struggling bank. But the question is which assets? And at what price?

Any financial institution in this current environment will find it hard to locate buyers. So in order to generate funds it will be forced to sell quality assets at a steep discount. Citi has tried to unload non strategic bank branches earlier with no success. Now with the cedit crises at full swing citi has to offer two things: 1. great assets, and 2. steep discounts to find buyers.

Selling assets is a welcome move but it will take place at the wrong time. I think Citi is better holding those assets for the time being and selling them later when it can get better value for them. For Citi to shore up capital, it needs to do the following:

1. cut costs by streamlining the "empire"
2. cut jobs
3. cut dividends

Once I see some of the above happen in Citi, it can be a turnaround investment candidate.

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