The Wall Street Journal reports that a well known investment banker is said to have called Citigroup after Chuck Prince stepped down as CEO earlier this month and suggested the possibility of a merger with Bank of America - imagine the fees on that one!
Citi is said, however, to have turned down the suggestion 'out of hand' and has confirmed that no discussions had taken place. The newspaper also quoted an unnamed 'person familiar with the matter' who said that this is the second approach Citi has received about a BofA deal in the last few months. Neither approach is thought to have been officially authorized by Bank of America itself, although many are wondering whether BofA might have been testing the water on the basis of plausible deniability.
In the meantime, there appears to be the general feeling that Citi's $7.5bn investment from the Abu Dhabi Investment Authority is but a drop in the ocean. Although the firm clearly feels that this is a significant step in beefing up its balance sheet, others don't quite see it that way, especially as the smart money says that the company is almost certainly looking at more substantial asset write-downs in the coming weeks. CIBC World Markets stock analyst Meredith Whitney has said that the Abu Dhabi investment was 'not enough, and certainly too late'.....'They're desperate', she continued, 'This $7.5bn is just not enough money by a long shot', while predicting that Citi is sure to cut its dividend and will also likely have to sell up to $100bn of top-rated assets in order to raise much-needed cash.
David Honold, from Turner Investment Partners, is quoted in The Wall Street Journal, saying that 'it's a bitter pill to swallow to admit that the problems in the market have reached the point that companies that traditionally could fund themselves now need external sources of capital'.