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Is Citibank Collapsing?

Nikhil Kumar (CA , Qualified CPA) (910 Points)

17 January 2009

Recently there was news about huge losses to citibank this quarter. It has already been bailed out by the govt. some time back.

will citibank be able to survive?

---Thanks

Nikhil

www.onlineaccountingindia.blogspot.com

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Varun Malhotra (Chartered Accountant) (207 Points)
Replied 18 January 2009

Originally posted by :Nikhil Kumar
"	Recently there was news about huge losses to citibank this quarter. It has already been bailed out by the govt. some time back. will citibank be able to survive? ---Thanks Nikhil www.onlineaccountingindia.blogspot.com	"

Well it is difficult to answer this question either way. Citigroup boasts $2-trillion in assets, $800-billion in deposits and 200-million customers in more than 100 countries, which will be greater even if we put together the assets of 6,000 banks at the bottom of the industry. Considering the size of bank it has been argued that the bank is too big to fail. The financial depth helped place Citi in the epicenter of the mortgage bust and high on the government's "must not fail" list. The government has gone to where they didn't go before in terms of trying to secure the system." But the bank is sitting on huge losses, it has reported a fourth-quarter $8.29-billion loss and announced it is splitting itself in two. Till the date government has injected $45 billions through the federal rescue plan. $ 306 billions worth of risky assets of bank are also guaranteed as part of rescue plan. This is putting taxpayers on the hook. Problems are not solved, they are just carried forward to future. Citi confirmed it was cutting 53,000 jobs globally, reportedly the largest single job cut from any industry in 15 years. So lets see what happens. But one thing is sure if Citi banks collapses it will send the shivers down the spine of world financial system. Global financial crisis will excerbate to the extent that it will be difficult to project then how much time it is going to take to come out of it.