May 9, 2008 11:56AM
By Donna Fuscaldo
Alas the Citi analyst meeting is over after more than three hours. Not too many shockers coming from the meeting given the intense attention Citi garners from the press. Analysts largely went easy on the Citi executives including Pandit. The same couldn’t be said for Citi’s investor meeting last month. Check out Elizabeth MacDonald’s blog posting for that story. http://emac.blogs.foxbusiness.com/2008/04/29/in-search-of-citigroups-robert-rubin/ Citi’s stock isn’t showing much confidence or disappointment. Shares of Citi were recently down slightly at $24.14. Stay tuned to Fox Business Network and Foxbusiness.com for further analysis on Citi in the days to come.
May 9, 2008 11:14AM
By Donna Fuscaldo
Executives at Citi faced questions about its move to raise capital by selling shares. Citi defended the practice by saying that having excess capital is a sign of strength in times of uncertainty. Citigroup says there are a number opportunities that the company can use the excess capital for. Since November Citi has raised $40 billion and recently announced it widening a new stock offering from $3 billion to $4.5billion.
May 9, 2008 10:53AM
By Donna Fuscaldo
Right out of the gate analysts want to know why Citi isn’t divesting more assets and why Pandit seems to be embracing the old business mix under ousted CEO Chuck Prince. One analyst asked Pandit why Citi doesn’t get rid of its U.S. consumer business, a business analysts have said make sense to shed. Pandit says Citi won’t do that because he thinks the U.S. consumer unit is a “great business.” The U.S. credit card business has an annuity revenue stream and is “critical” to its credit card business growing internationally, says Pandit. As for the consumer finance business, Pandit said it’s a “great business,” with high credit quality. Ditto for its US retail bank.
May 9, 2008 10:42AM
By Donna Fuscaldo
On asset sales, Crittenden said most of the legacy assets that will be sold or taken off the books are in the securities and banking and consumer banking units. Citi is aiming to have the securities and banking legacy assets off the company’s books in two to three years with 50% of the consumer banking legacy assets gone in that time frame. As for revenue, the CFO said the company is targeting 9% growth in global wealth management, 7% in global cards, 8% in consumer banking and 9% in securities banking. All told the company is targeting revenue growth of 8% to 10%. Grilling by analysts starting….
May 9, 2008 10:18AM
By Donna Fuscaldo
What will make Citi’s stock actually increase is the 800 pound gorilla in the room. Citi’s stock is down 53.7% since 2001. Citi CFO Gary Crittenden is trying to answer that as the presentation portion of the meeting starts to wrap up. (Most companies save the CFO for last to keep analysts and investors at the meeting and interested.) Crittenden says Citi is targeting a 75% efficiency ratio in its global wealth management unit, a 33% efficiency ratio in its global card business and a 54% efficiency ratio in the consumer banking unit. CFO says Citi plans to wind down its legacy assets in its mortgage portfolio. As for securities and banking, Citi is targeting an efficiency ratio of 65%. Crittenden reiterated that the cost of credit over the next several quarters will increase because of the deterioration in the credit card business and the residential mortgage business. Crittenden says the company is targeting an efficiency ratio for the entire company of 58% in two to three years. He says the company over the next three years, including this year, will have a total re-engineering benefit of $15 billion, largely from cost cuts.
May 9, 2008 9:58AM
By Donna Fuscaldo
With the credit market crisis creating A LOT of turmoil in the financial services industry, Pandit took time to discuss risk with analysts and investors. According to Pandit the financial market is shifting away from just-in-time liquidity and capital, which means the future model for Citi and other financial services companies will be to have more capital and larger balance sheets beyond what was required in the past. That, says Pandit, is another reason Citi’s large size is an advantage. He says risk has to be rethought but also is an opportunity for Citi. Underscoring the changing capital requirements for companies like Citigroup, Citi has raised some $40 billion since November. Citi’s chief of risk Brian Leach talking now……
May 9, 2008 9:33AM
By Donna Fuscaldo
Despite numerous calls for Citigroup to break the behemoth up, as expected Pandit dismissed that notion, saying the company is not a conglomerate or a financial supermarket but a “global universal bank.” He argues being a universal bank, especially in emerging markets where the capital markets are undeveloped, is the best model for Citigroup. Pandit says that while any model works in good times, having a universal bank in bad times is the way to go. (Too bad the stock price so far this year doesn’t reflect that.) “The economics are clear to me. The best value is created through a large global integrated financial structure and by operating a fully integrated company,” says Pandit. He says that will create “extra value to shareholders.” Shares of Citigroup are trading down less than 1% to $24.18.
May 9, 2008 9:22AM
By Donna Fuscaldo
Freiberg has left the stage and Pandit is back. With U.S. markets hurting, Citi seems to be focusing on emerging markets. According to Pandit the middle class in the emerging markets will grow to 1.2 billion by 2030, presenting a big opportunity. He says Citi is structured to compete aggressively in local markets. Citi is growing in Taiwan, India, Brazil, says Pandit, noting the company has grown 27% aboard over the last three years. As for securities and banking, Pandit says the market capitalization of companies in the emerging markets is expected to grow to 24% in 2012 from 6% in 2001. Pandit said Citi has trading floors in 90 countries. Showing that Citi is going to have restraint in pursuing growth, Pandit says the company will exit unprofitable “client relationships. “You may hear noises about this. I think its good noise,” says Pandit.
May 9, 2008 9:05AM
By Donna Fuscaldo
Pandit turns the microphone over to Steve Freiberg, Citi’s head of its global consumer group which includes its debit and credit cards. Pandit did take the chance to admit one (of many mistakes) at Citi: cutting back on marketing in that unit. Pandit said that was a mistake but that there is a “lot of growth” in the Global Card business. Pandit vowed to cut costs and pour the savings back into marketing where it’s appropriate. Pandit said Citi is committed to growing the business and dismissed criticism that the company needs to have thousands of branches. If Citi had “5,000 branches” in the U.S. the company could “hand out a lot of cards but it wouldn’t be large enough to support our growth strategy,” said Pandit. Things are likely to get heated later at the meeting when analysts have their chance to grill Citi executives.
May 9, 2008 8:51AM
By Donna Fuscaldo
Reports said Citi could unload $400 billion in assets, but Pandit took it a $100 billion further. Pandit said Citigroup has identified $500 billion in legacy assets the company will get rid of in an “orderly fashion” in the next few years. That could come in part via asset sales. Pandit said the company could have revenue growth of 8% to 10% over time and called for patience by investors as it’s restructuring and growth strategy plays out. Pandit said the overhaul will be three stage approach with phase one cutting costs, phase two all about restructuring and phase three about growth. Pandit said the stages could overlap and early results are likely to be seen.
May 9, 2008 8:40AM
By Donna Fuscaldo
Citigroup meeting kicks off with CEO Pandit taking to the stage to introduce the management team. Pandit calls Citigroup’s restructuring one of the “greatest business transformations,” and that he’s confident his team will get it done. Pandit is using his opening comments so far to talk about what he’s done: assets sales, shoring up capital etc. Pandit said Citigroup has established a “strong capital base for today and in the future.”
May 9, 2008 8:20AM
By Donna Fuscaldo
Investors are angry. Shares of Citigroup (C )are down more than 50% since setting a high last spring of $55.55. The financial behemoth has taken a massive hit as the credit market malaise has wrecked havoc on most of Wall Street. While Citigroup has raised some $40 billion since November and widened its stock offering from $3 billion to $4 billion Citigroup’s new Chief Executive Vikram Pandit is still on the hot seat. Pandit is sure to face some tough questions from Wall Street at its analyst meeting happening in a few minutes. Pandit has deflected calls to break the company up, which has angered lots of investors, but has shown little progress in righting the ship so far. Reports out this morning said Citigroup has identified $400 billion in assets to sell and could lay out plans at the meeting. Like most analyst meetings, Citigroup is sure to put a positive spin on its businesses and face some softball questions from Citigroup bulls. Still there are those bears out there, like Meredith Whitney at Oppenheimer, who could call Citigroup executives including Pandit to task for the company’s dismal performance. One upshot for the leaders of Citigroup: they probably won’t have to worry about getting fruit thrown at them. A real fear Citigroup had during its shareholder meeting. (Check out EMAC’s Stock Watch posting from April 29th for more on that).
May 4, 2008 8:03PM
By Liz Claman
Warren Buffett just finished up the media conference where he fielded dozens of questions from the International Press Corps. Every major newspaper from the U.K., China, Brazil, Canada, Japan, Taiwan, Korea and of course the US were represented.
He made some big news on a variety of subjects, namely:
–Buffett telling Fox Business that even though the valuations of the top 30 Financials have come down, their stocks ar still unattractive to him because he can’t tell what other losses are still lurking.
–he also told Fox Business that he doesn’t believe there’s another Bear Stearns-type meltdown lurking within the financial sector…simply because the Fed won’t let it happen. He told us the Fed did the right thing.
–many of the present problems in Financials are richly deserved…the arsonists have been caught in the fire they set.
–it’s conceivable BRK would buy more Korean stocks
–the Canadian dollar in the next 10 years would be more likely to be stonger against the dollar
–BRK is the first company European co’s should look to if they want to sell their businesses.
–he will travel to four European countries over four days this month, looking for fertile companies to buy.
–The Chinese economy is one of the economic wonders of our time
–BRK would love to buy a big Japanese company, but at the right price
–regarding NAFTA and free trade, he said the more free trade the better. You don’t want to penalize or reward any one country.
–if I had $1 million dollars with which to invest, it would be easier to go through a manual of korean stocks than through a manual of banks.
Gang, we will have MUCH more on Fox Business tomorrow at 9:30am ET when I sit down LIVE with the man himself, Warren Buffett of Berkshire Hathaway.
See you then!
–Liz
May 3, 2008 11:34AM
By Liz Claman
3:57pm ET
On selling PetroChina holdings and why Buffett chose to sell after just a few years of owning it
“If it came down to a better valuation, we would buy PetroChina again… The Chinese people are starting to realize their potential.”
–Buffett
The last question from the crowd: What’s your fondest hope for BRK??
“I hope for performance and I fully expect that what we’ve built into Berkshire will live far beyond my tenure. We have about as strong a culture as you can find in American business. We want stong businesses with managers who want to run the businesses for the rest of their lives.”
–Buffett
Buffett and Munger are getting a standing ovation from the crowd. How often do you see THAT today with all the embattled businesses out there?
So gang, I’m heading off to the Nebraska Furniture Mart to set up for our live show tonight. Make sure you join Fox Business at 7pm ET tonight because I will have an interview with Warren Buffett, all the big news coming out of the meeting today, interviews with the heads of See’s Candies, NetJets, the Furniture Mart, the Mayor of Omaha, Morningstar’s Pat Dorsey for post-game analysis, and of course the continuing festivities and hoopla that continue tonight.
Gotta go! See you at 7pm!
–Liz
2:45pm ET
Buffett and Munger are still going strong after 5 hours of shareholder questions. They’re both sitting on the stage at a simple table, each with their own boxes of See’s fudge and peanut brittle in front of them that they keep liberally sampling.
These two have the crowd riveted both with investment advice and one-liners.
“We waste a lot of time but we’re not going to waste it on things we don’t want to buy.”
–Buffett
On whether he’d consider asking Coca Cola to pull out of the Beijing Olympics:
“I personally hope the Olympics are held every year. I mean, we didn’t let women vote til 1920 and I would say that was a major human rights violation. It’s a terrible mistake to try to (influence companies). I would not start getting punitive about it.”
–Buffett
(Btw, BRK is Coca Cola’s largest shareholder.
“Warren understates my position.”
–Munger
2:15pm ET
Regarding the BRK-Mars-Wrigley deal…
“When we get a call like we did from Mars (to get in on the Wrigley deal) you say yes. It doesn’t matter what’s going on in the world, whether Ben Bernanke runs off to South America with Paris Hilton…no matter what, you say YES.”
–Buffett
On his recent investment in Kraft…
“We feel you have to buy products that are runaway leaders in their field. If you buy a great product (companies) and you don’t pay too much you’ll probably end up rich.”
–Buffett
On succession plan at BRK
“We’ve made firm or definite on four (candidates). It’s very important to me to pick someone who understands and can envision serious risks…you need somone very solid, someone you trust with reasonable analytic skills, but also someone who has the ability to envision something that doesn’t show up in your previous models.”
–Buffett
12:55pm ET
Buffett is asked about how to invest small sums of money.
“I would go with Vanguard or another trusted name…I would think equities would outperform bonds….you’ve got a perfectly decent return over the past 30-40 years.”
–Buffett
“If you don’t have any prospects of being a skilled investor, do not judge stockbrokers by the bad ones you meet.”
–Munger
“It’s always better to save 10 percent of your income than 5 percent of your income.”
12:50pm ET
FLASH: Buffett and Munger discuss energy, Charlie endorses solar energy!!
“Oil won’t run out but oil, at some point, daily productive capacity will first level out and then decline… So we’re producing 87 million barrels in the world a day…but when it peaks the world will adjust to it. We will be producing oil far beyond this century. We’ve messed up the recovery of many oil fields… It’s nothing like an on and off switch though..you may still have enormous political considerations in accessing it…but there’s nothing anyone can do in the short term to wean the world from oil.”
–buffett
“We can use the sun..there’s no other alternative. I think it’s perfectly crazy to use up hydrocarbons…”
-Munger
12:15 pm ET
From a fan who complained he can’t buy See’s Candies in his hometown of Bonn, Germany: the question; do you want a company with high profitability and kokay’ growth, or a company with strong global growth and lower profits.
“It doesn’t matter to us. We want a business with a durable, competetive advantage, good management and a price that’s fair.”
–Buffett
“We are happy to invest in businesses that earn their money in Euros, in the U.K.
Overall I think the US is going to continue its policies that will weaken the dollar.”
–Buffett
11:55am ET
“In a general way we’ve done the same thing every year. We will have more businesses in the coming years. Most will do well, some won’t, but it’s a very simple formula…”
–Buffett
“You’ve got to remember that most small businesses will never be big businesses, and that most big businesses will be faced with mediocrity.”
–Munger
After yet another question (the third so far) about pollution from a BRK-owned utility, the crowd got restless..some are getting up and moving around.
“You could have a national energy policy instead of leaving it up to the states.”
–Buffett
Here’s a question from a 12 year old shareholder from Philadelphia who asked what he should be reading outside of school assignments.
“Well you should read your daily newspaper..you wanna learn the most you can about the world around you. You should just sop it up…sports, finance, politics. I’ve found the more you learn, the more you want to learn.”
“Charlie’s 84 and I’m 77. We’ve slowed down but we pretend we haven’t…”–Buffett
“We have great partners, great managers…there’s just no reason to focus on any negatives in life…–Buffett
“I wish we were poster boys for the benefits of running marathons.”–Munger
In response to a shareholder who asked “if you were to start all over again, what profession would you choose?”
“I would choose what I do now because I’m good at it and there’s no heavy lifting. What’s your passion in life? It’s a terrible thing to sleep-walk through life… I got lucky because I found out early what my passion in life is.”
–Buffett
May 3, 2008 11:28AM
By Liz Claman
Regarding ISCAR’s new Asia plant and high commodities prices:
“The reason the plant was built in China is the country is growing…generally speaking, if you’re creating a higher-valued product,… obviously the changing price of commodities…there will still be no substitute for the raw materials used in the products. Over time, our businesses will reflect the higher cost of commodities..you’ll have little squeezes here and there.”
–Buffett
“We don’t like inflation. It’s bad for the country and bad for business.”
–Munger
“I think you can take warren’s promises to the bank.”
–Munger
One investor got up to say he was disrespected last year after he did not get Buffett’s attention during a group protest against Pacific Corp for environmental issues caused by the building of a dam.
“We may have a difference of opinion, but I never meant to disrespect anyone.”
–Buffett
