"Is Citibank Risky?" Survey

[SIA1A]

I received a call from Citi (actually, a survey company that claimed it was calling on behalf of Citi) a few days ago.

After asking for me by name, I was asked "are you comfortable about dealing with Citibank, given the risks in the global banking market." (The words may have been a little different.)

I replied "No" (ie I am uncomfortable), following which the caller thanked me and then hung up.

Has anyone else received similar calls? I run a large credit card balance with Citi but I have a bank balance with Citi that covers my credit card outstandings about 20 times. I have also received several unsolicited snail-mail letters from Citi that attempt to reassure me about Citi's credit worthiness.

Reason I am uncomfortable: It looks like Citi will only survive if it gets another very large US Govt bailout stash. Share price has dropped from high $50s a little over a year ago to less than $4 today.

I'm also very uncomfortabe about govt guarantees - the government may guarantee the bank's deposit funds but I do not believe that it guarantees timely repayment of those funds if the bank goes belly-up. ie it could take months or years to recover money under the govt guarantee.

 

[skybolt_]

I'm a Citi Credit Card & deposit customer also.

Its the deposit situation I'm also getting a little nervous about.

It maybe time to say 'hello again' to either CBA/NAB/WBC or ANZ.

 

[ric_melb]

I am in a similar position with Citibank deposits and Citibank credit cards.
When the Financial Crisis got more severe I reviewed my position regarding Citibank.

I think the first reality is that Citibank is too big to be allowed to fail. We have already seen the US government support it, and given the fact it operates in 100+ countries any failure would cause great difficulties in many countries. Trying to clean up the mess would be horrific, and I imagine many governments have advised the US government accordingly.
Apart from that I think the US government knows it.

Now we have the Australia Government guaranteeing deposits up to AUD1 million for the Citibank Australia vehicle. This is current till October 2011.
I have not been able to google up detail on interest payments, but it would seem to me the Government intent would be to cover both principal and interest payments.

My own conclusion was to continue with Citibank, but I think if others have worries, then they should consider moving their deposits to one of the Australian Big 4. Not only are the 4 in a relatively sound position, plus have the Government Guarantee, but in our context they are too big to be alowed to fail.

 

[comint]

I think the first reality is that Citibank is too big to be allowed to fail.

I have to disagree, many of these companies are too big NOT to fail. Then like the bloated carcass of a dead whale washed up on shore, the best bits can be picked off by other more efficient businesses, strengthening the market as a whole.

 

[vilemerchant]

Citibank have always been a great place to get and park DEBT, but there's no way on earth I'd keep even a dollar on deposit there. They can't be bailed out forever, the Americans are printing so much money bailing out all and sundry with money they don't even have that the US$ will eventually fall on its cough. Citibank are pretty screwed in the longterm and pretty much HAVE to fail.

What on earth is the point of keeping your own money in a Citibank account?

 

[trippin_the_rift]

Citibank have always been a great place to get and park DEBT, but there's no way on earth I'd keep even a dollar on deposit there. They can't be bailed out forever, the Americans are printing so much money bailing out all and sundry with money they don't even have that the US$ will eventually fall on its cough. Citibank are pretty screwed in the longterm and pretty much HAVE to fail.

What on earth is the point of keeping your own money in a Citibank account?

I have to disagree with this...

Citibank sure is a great place to park debt and as such they have created a lot of money for the world. Governments NEED banks and that's why they're getting what seems to be unlimited green lights to create more money into existance.

Long term, citibank is fine as long as it's client's can service the debts. The rest is all hype.

 

[kdser]

Hi Guys, don't worry. Citi Australia is going to be bought by one of the Australian banks. I am more concerned about the competition after the likes of GE Money, BankWest, Wizard are gone.

 

[SIA1A]

Hi Guys, don't worry. Citi Australia is going to be bought by one of the Australian banks.

Really? Who? Whichbank maybe?

 

[SIA1A]

I am more concerned about the competition after the likes of GE Money, BankWest, Wizard are gone.

There's still some strong competition around, eg HSBC. ING seems to be doing OK too after its Dutch govt intervention.

 

[kdser]

Really? Who? Whichbank maybe?

I have read somewhere that Citibank is trying to sell its Australian operation. One or two of the big 4 are interested.

However, it doesn't really matter who is the potential buyer. NAB had always been the potential buyer of Wizard before Oz Home Loan grab Wizard.

 

[SIA1A]

Hmm. Perhaps the survey company that called me (see my OP) was cold calling, didn't know I was a customer, but had the objective of ascertaining the 'stickiness' of the Citi retail customer base on behalf of a potential buyer?

 

[skybolt_]

Citibank have always been a great place to get and park DEBT, but there's no way on earth I'd keep even a dollar on deposit there. They can't be bailed out forever, the Americans are printing so much money bailing out all and sundry with money they don't even have that the US$ will eventually fall on its cough. Citibank are pretty screwed in the longterm and pretty much HAVE to fail.

What on earth is the point of keeping your own money in a Citibank account?

I agree. Its just plain silly to have a deposit account when Ausssie banks are (probably) the safest in the world.

In the long run Citibank WILL NOT be fine as it sells off bits of its business, including its credit card business.

And thats not hype.

 

[trippin_the_rift]

In the long run Citibank WILL NOT be fine as it sells off bits of its business, including its credit card business.

And thats not hype.

That's a strong statement - where's the facts to support it?

 

[skybolt_]

That's a strong statement - where's the facts to support it?

1. Multi BILLION bailouts.
2. Its most profitable arm (in Aust anyway) is its credit card business which is likely to be sold off.

If you can't see the forest for the trees.............................

 

[drron]

But a major shareholder in most large US banks is now the US taxpayer.
And the major contributors funding Pres. Obama's $US140 million inauguration were the banks.

 

[trippin_the_rift]

1. Multi BILLION bailouts.
2. Its most profitable arm (in Aust anyway) is its credit card business which is likely to be sold off.

If you can't see the forest for the trees.............................

I'm still not convinced....

1. You don't go selling off the most profitable part of your business in an attempt to recover from heavy losses.
2. Servicable bebt is a good thing (for an economy), that's how banks make money and how the world evolves.
3. AU !== US

I'm extremely clued up with how money is created, moves around and lubricates businesses.... my gut feeling is Australia is not affected as much as the hype makes out we are.

Some businesses are simply feeling the pinch of bad descions.

 

[skybolt_]

1. You don't go selling off the most profitable part of your business in an attempt to recover from heavy losses.

Well guess what, THEY ARE!!

 

[medhead]

Well guess what, THEY ARE!!

Really? Link to an annoucement?

 

[pauly7]

2. Its most profitable arm (in Aust anyway) is its credit card business which is likely to be sold off.

.

Source?

There are alot of people stressing and feeding off every doom and gloom message K-Rudd puts out. Citibank Australia deposits are guaranteed - Just like all of the big 4.

And to ridicule people from having deposits with Citibank Australia is short sighted, they actually have some incredibly good deals on fixed interest products atm not to mention an award winning transaction account that I know many people on this board have as well.

 

[SIA1A]

Citibank Australia deposits are guaranteed.

The issue is the form of the guarantee. Yes, if Citi Australia goes pfft you will get your money back. That's not the issue.

The real concern is WHEN will you get your money back?

Within 1 day (answer - no, it takes longer than a day to sort out a bank insolvency, especially when the staff have been let go and the computers have imploded).

Within 1 week? A month? Years?

The government and the banks seem to be silent about this critical matter. The Australian banks are possibly in good shape (so we are told - but how do we really know? When a bank collapses it happens fast because a loss of confidence, even for a 'good' bank, immediately produces liquidity issues.)

As for Citi - we KNOW that the mother ship is in bad shape and is relying on Uncle Sam's largesse. Depositors with Citi Australia could well be relying on the delivery of that Australian govt guarantee. We really do kneed to know the details about the speed of the bailout if a fateful day does arrive.