We scoffed this afternoon when we heard that Vikram Pandit was telling Citi’s Investor Day audience that “the entire banking sector is essentially well-capitalised for business if you look at Tier 1.” Presumably, “the entire banking sector” includes the goliath Citigroup, which Pandit runs. He should know better than anyone how well capitalised Citi is, right? So what business do we have scoffing at his remarks?
Well, for one thing, we have long memories. Longer, it seems, than Pandit. We can remember as far back as 10 months ago.
In March of last year, Vikram Pandit was touring Citi’s Asian operations. At some point during the tour, it was a Wednesday, he decided to give his employees a pep-talk. His message: “Citi is sound…we are well-capitalised.”
Fortunately he delivered the pep-talk in a memorandum, so we have more than our memories to reply upon. DealBook reprinted the memo, which we’ll excerpt here.
“At the same time, Citi is financially sound — we are well capitalised and extremely focused on the strength of our balance sheet. On a pro-forma basis at the end of last year, we exceeded our regulatory requirements and internal targets for capital levels. We anticipate that divesting some of our peripheral businesses will further contribute to our capital base,” Pandit said.
Sound familiar? Right. Us too.
After Pandit said that, Citi had to take $45 billion in TARP capital plus $306 billion in loan guarantees from the government. If history is any precedent, Citi’s shareholders should be very, very nervous.
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