The golden child of the banking world has turned on the prodigal son. Goldman Sachs - which will not, repeat not, be making significant write-downs - has had it with the cult of the disappearing dollars elsewhere on Wall Street.
The bank’s analysts have slapped a sell order on Citigroup, downgraded their estimates, and lowered their target price to $33. US futures fell on the back of the note. Citi were down 2.6 per cent at $33.11 a share in premarket trading.
Citi’s down 40 per cent this year, and 28 per cent over the past three months, but the team at Goldman believe that the rudderless banking behemoth has further to fall.
We see four factors driving underperformance: (1) additional write-offs on its remaining $43 billion of CDO exposure, (2) pressure on the firm to shore up Tier-1 capital ratios which may need to come from an equity infusion, asset sales, or a reduction in the dividend, (3) deteriorating consumer credit trends and higher corresponding provisions and charge-offs, and (4) no clear leadership at the firm....MORE