Citi shares plummet, talks with Govt ensue

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New York, November 22: : falls too much.

Sean Egan, analyst at ratings agency Egan-Jones Ratings, said, "Citigroup needs a deep-pocketed investor that is ready, willing, and able to step up in the next few days, and the only one who comes to mind is the government," adding that at least $50 billion may be necessary.

The bank is running ads in major U.S. and international newspapers on Sunday emphasizing its stability, noting that "200 million people around the globe have put their trust in Citi to take control and secure their futures."

The Incredible Shrinking Citi

Citigroup's market value fell to $20.5 billion on Friday. That's less than the $25 billion taxpayer-funded injection that Citigroup just received from the federal government, and a fraction of the $75 billion of capital that Citigroup has raised since the credit crisis began last year.

The bank's market value topped $270 billion in late 2006.

The latest declines left Citi smaller by market value than each of Canada's top three banks: Bank of Nova Scotia, Royal Bank of Canada and Toronto Dominion Bank.

Citigroup's market value is now also in line with Goldman Sachs Group Inc's. Investors speculated on Friday that Goldman might look to buy Citigroup, but a person familiar with Goldman's strategy said it is not interested.

Analysts speculated that the bank may look to sell its Banamex business, the second-largest bank in Mexico, in a deal that could raise as much as $15 billion for Citigroup.

Regulators Have Intervened Before

Within the last three months, major US lenders Wachovia Corp and Washington Mutual Inc suffered rapid outflows of deposits, as losses mounted on mortgages and other debt.

Under pressure from regulators, Wachovia agreed to sell itself, while Washington Mutual failed and its deposits and some of its assets were bought by JPMorgan Chase & Co.

On Monday, Pandit set plans to shed 52,000 of Citigroup's 352,000 jobs by early 2009, and to move tens of billions of dollars in troubled securities onto its balance sheet.

The bank is also pushing the US Securities and Exchange Commission to reinstitute a temporary ban on short sales of financial stocks, a person familiar with the matter said. The broader industry is also lobbying for a temporary ban.

In the credit derivatives market, the cost to protect $10 million of Citi's debt for five years rose to $470,000 annually, up from $395,000 annually on Thursday, according to Phoenix Partners Group.