"Is Citibank Risky?" Survey

[ethernet]

The right question is does any deposit interest premium outweigh risk for you?
The second question to ask: is this a deposit - or cash management?

The financial stability of many banks is unknown- even to the banks - that is they don't know the net worth of all these cross linked junk instruments. Fortunately, Australian banks did not bet their shirts (but many local councils did).

If in doubt, spread the risk, eggs not all in one basket.

 

[medhead]

When a bank collapses it happens fast because a loss of confidence, even for a 'good' bank, immediately produces liquidity issues.)

Exactly, so having the depositors here deciding that citi is risky and then maybe moving to withdraw is only going to Citi more risky, especially if there is a run on deposits. A real Catch 22 situation. The bank might fail but if they withdraw their money the bank is more likely to fail.

Personally, I see the govt guarantee will see the government buying out the creditors/depositors and then trying to recover whatever is possible. So depositors may get their money sooner rather than later.

 

[vilemerchant]

Obviously it hasn't happened yet. The main argument against Citi is not that it's GOING to fail, it's that the big 4 in Australia are far less likely to fail, so what in hell would possess anyone to keep money on deposit with citibank???

 

[ethernet]

I cant resist drawing comparisons -
Would you NOW put your money in an Iceland Bank, British or Bulgarian Bank to name a few, but people and hedge funds ARE. Staying VERY quiet are people who should be able to collect on AIC 'security insurance'.

Even now the USD is riding high, while their printing presses are working - while this toxic debt is not written down to market price.
One Australian bank is offering 9% yield, after declaring it is 'safe', yet not attracting money because of past porky pies.

The deposit guarantee probably levels the deck for now. But it will be interesting when this is 'withdrawn or altered' when the chickens come home to roost (Hungary, Iceland, UK and bits of USA).

In meantime, only financial advisers can advise, but Chinese currency is reputed to be undervalued.

 

[medhead]

One Australian bank is offering 9% yield, after declaring it is 'safe', yet not attracting money because of past porky pies.

I don't know how you can claim a bank is offering a 9% yield. The bank doesn't offer any yeild until it declares a dividend. Any yield number is either based on past dividends or projected dividends relative to the current shareprice. This is only an estimate and it certainly isn't an offer from the bank itself. Expect that 9% yield to drop rapidly once the real dividends are declared.

 

[pauly7]

Obviously it hasn't happened yet. The main argument against Citi is not that it's GOING to fail, it's that the big 4 in Australia are far less likely to fail, so what in hell would possess anyone to keep money on deposit with citibank???

You really need to keep in mind the way Citigroup is structured though...

Citibank Australia is run as a seperate enitity and as with all other Australian banks falls under the same regulations that have supposedly made our banks the best or at least some of the biggest in the world (now!). Citibank Australia's credit rating is actually very strong - comparable to the big four and has largely escaped its parents troubles. The point being that the way it operates here is very different to the US. And of course as it has been pointed out that it is also backed up by the Australian government deposit guarantee.

I think your comments are slightly hysterical....or a mole for the Aus banks perhaps (jokes ) however if you are referring to people holding deposits with Citibank N.A or other arms not covered by Aus regulations (you weren't clear what arm of Citigroup you were referring to) then I would be more inclined to agree with you - however the broader feeling in the financial community is that Citigroup will more than likely split in two or become nationalised, either way people should be ok....

 

[SIA1A]

You really need to keep in mind the way Citigroup is structured though...

Citibank Australia is run as a seperate enitity and as with all other Australian banks falls under the same regulations that have supposedly made our banks the best or at least some of the biggest in the world (now!). Citibank Australia's credit rating is actually very strong - comparable to the big four and has largely escaped its parents troubles. The point being that the way it operates here is very different to the US. And of course as it has been pointed out that it is also backed up by the Australian government deposit guarantee.

I think your comments are slightly hysterical....or a mole for the Aus banks perhaps (jokes ) however if you are referring to people holding deposits with Citibank N.A or other arms not covered by Aus regulations (you weren't clear what arm of Citigroup you were referring to) then I would be more inclined to agree with you - however the broader feeling in the financial community is that Citigroup will more than likely split in two or become nationalised, either way people should be ok....

A couple of things:

1 The AGDG guarantees repayment of bank deposits held in Australian banks but from my reading, it does not guarantee TIMELY repayment of those deposits. If called on, the guarantee might be fulfilled on immediately, the next day, the next month... or possibly in many years time. Who knows? As with any guarantee, the buyer (in this case, any Australian bank deposit customer), needs to carefully read the fineprint and understand the terms and conditions of the ABDG.

2 You seem a little out of the loop - the "feeling" in the financial community is actually fact. Citigroup Inc in the US announced in mid Jan 2009 that it will split into two entities. More recently, it named the people that will head up those entities.

No announcement has been made concerning the future of Citi's Australian operations, however there is speculation doing the rounds (believe what you wish) that the Australian operations will be sold to one of the major Australian banks. My observation: The retail customer base of Citi Australia, in particular its large ethnic Chinese base, would probably fit well with HSBC too, although the corporate cultures of Citi and HSBC are very different.

 

[Flashback]

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

I wonder if that has any correlation to so many people being upgraded to the Platinum card?

 

[bambbbam2]

I think they are in a lot of trouble, esp in the US.

There was a story on the news the other day that said thanks to the credit crisis, the Big 4 Aussie banks are all now in the 20 biggest banks in the world.. Scary

 

[oz_mark]

Based on Stock Market capitalisation - yes they are in the top 20. Citi has gone from No 1 to number 22, and at the moment HSBC is sitting at Number 1.

Here is an article: Big Four Australian banks have joined the global elite | The Australian

 

[JohnK]

I have a reasonably high credit card debt with Citibank as well. Should I be concerned? I don't know! If something happens to Citibank and I am asked to repay the amount owing tomorrow then I am in a little bit of trouble. I decided a couple of weeks ago that I will try to get the credit card debt with Citibank down to a manageable amount. Just in case....