Bank of America…Bubble ?…Bankrupt ?….Breaking Down ?….Going ? …Going?….Gone?

A year ago,USA’s biggest bank ,Bank of America quoted at US $ 43.Yesterday is sank below US $ 4  and recovered to close at US $4.84…down 66 % in January alone this year

Market Cap has sunk below US $ 31 Billion…Bloomberg puts it rather tongue in cheek…One share of Bank of America will not even buy you a Big Mac in New York City.The Big Mac Meal costs US $ 6.59 at McDonald’s in midtown Manhattan

Bank of America received a US $ 45 Billion bailout package from the US Government late in 2008….It awaits and expects more

But what has it done with this US $ 45 Billion !?…Let’s  see

  • It Invested US $ 15 billion to double it’s stake in state owned China Construction Bank
  • For Assets of just US $ 100 million it paid US $ 2.5 billion to Countrywide

It’s buyout of Merill Lynch is already turning bad 

Like Citigroup,Bank of America could also be on it’s way to be broken up to split it’s US $ 1.8 Trillion Assets and 243000 Employees

A Sinking Share Price indicates clearly something BIG IS WRONG WITH BANK OF AMERICA….It appears that Federal Investigators are currently all over the Bank of America  confronting it’s CEO,Kenneth Lewis with chilling evidence of huge mismatch between assets and liabilities and a severe Liquidity Problem that is threatening it’s solvency and survival

Isn’t BOA,a Constrictor !?…It seems the acronym,BOA is a Self Constrictor !  

‘citi never sleeps’…well ! Citigroup should !

Their Ad Tag line says it all ‘ citi never sleeps’…. Well ! Citigroup should !… so that others too can !

Citigroup is facing serious survival issues

It’s share price has dipped below US $ 4, closing on Friday at US $ 3.77, from over US $ 30 just a year ago when Vikram Pandit, of Indian origin, took over to try and save the bank. This past week itself it crashed 60%. On Friday it even reached a low of US $ 3.05 before recovering. It’s now quoted at a fraction of the Book Value and may look very attractive as it does to it’s major shareholder and saviour more than once, Prince Alwaleed bin Talal of Saudi Arabia who announced that he is raising his stake to 5% in Citigroup

The Bank has showed losses in the past four quarters. It’s profits dived to US $ 3.6 Billion in 2007 from US $ 21.5 Billion in 2006. The Balance Sheet at September 30, 2008 shows total liabilities in excess of US $ 1.9 Trillion supported by an asset side of US $ 2 Trillion with Shareholders Equity at US $ 126 Billion.

However cash and Cash equivalents and Short Term Investments make up just under US $ 400 Billion. A major asset chunk is US $ 1.3 Trillion in Long Term Investments of which reportedly over US $ 700 billion are related to mortgage securities and of which many are suspect… The Bank would probably require close to US $ 200 billion to bail-out of troubles… The Share Price is now below Book Value and the Market Cap has dramatically dropped to US $ 20 Billion from over US $ 200 Billion a year ago.. It has made huge losses of Billions of Dollars in Hedge Fund SIVs and is now closing nine of them them to prevent further loss

Should Citicorp be bailed out ?

It never sleeps because it cannot !…having created such a mess it’s now trying to clean it up……. Like Lehman, Citigroup too needs to finally go to sleep…. that’s my personal opinion based on both the deep financial malaise and the deep rooted arrogant and condescending psyche within the bank for decades now

I am not really anti Citigroup but my reservations on it have grown over many years now.Have a look at some of the reasons why these reservations came about.Some  have involved my clients in  India…..The Issues are varied in nature

  • A client had an account in Citibank and had issued a cheque which bounced… He said this was not posssible and obtained a letter from Citibank which acknowledged their mistake and asked me not to judge the financial position of the client adversely
  • A Non Resident Client has Deposits with BCCI, a notorious bank which collapsed. He had given Citibank the Deposit Receipts with the authorisation to them to present them to BCCI on due dates and have these deposits transfered to Citibank… Citibank forgot to do this and BCCI went bust and the clients monies got locked up … I had to personally intervene and fire the Bank for this… would you beleive it that the Bank said they reserved the right to file a case against their own concerned Division responsible for this crisis… Fortunately, the Citibank CEO, Mr Jerry Rao, intervened into this issue and personally requested the liquidator to let Citibank release the Monies to my client and they would later claim the clients BCCI deposits
  • Before the Dematerialisation of Shares, all shares sold had to be physically delivered to the Markets. A Client had sold shares which were pledged against an overdraft in Citibank. He had already applied to the bank to withdraw the share certificates…. Citibank failed to deliver on their stated due time to collect the same… I had to personally go and fire the Bank offcials and warn them that if they do not give the shares the same day they would be liable for the auction costs and price differentials… The Bank’s safe custody facilities were located elsewere… but they urgently despatched their officer to get  the shares
  • In 1991/92 just before the late Harshard Mehta’s Bank and Stock Scam was exposed, I had approached the bank to place Certificates of Deposit of Good Amount with the Bank for  Clients… The Bank refused to entertain me because, as I later learnt, they preferred to restrict their association and involvement with only a certain cartel of leading Brokers who were on the other side of the Road of the Big Bull, the  Late Harshad Mehta… When Hell broke lose and the Big Bull Banking Receipt (BR) Scam unfolded in April 1992, it is strongly rumoured that Citibank hired Hotel Rooms and had shredders installed in them and Day and night, their employees destroyed evidence of questionable deals… The Bank’s Operating License in India was under threat….. the Citigroup Global CEO at the time, John Reed, had to personally fly in and, I believe, warn our Government that if they took away the License then Citibank would withdraw Deposits of Billions of Dollars from India…at the time we were very precariously poised with our FX reserves which at one point had dipped to just US $ 1.7 Billion  
  • When I was on an assignment in Doha, Qatar last year, I learnt that Citigroup was lobbying hard to enter Qatar in a big way as huge gas reserves and rising prices were proving to be a goldmine for the country and the bank wanted to tap into this wealth… Qatar was not to keen as when it was facing financial issues, Citigroup had disdainfully refused to support the country… banks which did support Qatar when it needed it most, rightfully were allowed to scale up in Qatar and reap the advantage of tapping into the growing wealth 

Citibank had this very transparent policy of hiring young Indian Professionals whose parents were either well known Industrialists or held top and influencing and powerful positions in Private and Public domain… the lure was material… wisely, many realised that they were being used and expoited and left the bank… a close friend was man enough to show them his middle finger when they blatantly told him they would offer a job if he got along with him the account of a Leading Indian Company which his father headed   

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Bhilwara Spinners under Hostile Bid by Ashok Kumar Parmar…Parmar ? Aha ! Suzlon !

Ashok Kumar Parmar has surfaced yet again to make an unsolicited hostile Bid for Bhilwara Spinners.He is making the Mandatory Public Offer to acquire atleast 20% of the Equity of the  Company at Rs 15,having already accumulated 15% of the equity stake…Bhilwara is locked up by 5% on Upper Circuit at Rs 11.99 today on the BSE 

Does this name,Ashok Kumar Parmar, ring a Bell ,other than his efforts to buy into the Videocon Group ?

Is it the same Parmar who made a killing in SUZLON ? If so, all else is Petty Cash for Parmar except for Suzlon

Let me stir all of you up

The Suzlon IPO was at Rs 510 for a Face value of Rs 10.The Issue opened on September 23,2005 and closed on September 29,2005 and was oversubscribed nearly 46 times

The Pre IPO Shareholding in Suzlon reveals some really interesting facts…While all of India craved to be allotted shares in Suzlon,those who controlled the whole IPO Process,Citigroup and ChrysCapital, were the largest beneficiaries

Citigroup initially invested just Rs 50 crores for an allotment on April 19,2004 of 2577320 shares at Rs 194.It is this lot that it offered for sale at Rs 510 in the IPO.However the Pre IPO Holding swelled to 23195880 shares through the largesse of two liberal 2:1 Bonus issues on September 25,2004 and June 24,2005 reducing the holding cost per share to just Rs 21.56…The Company clearly had a premeditated gameplan in issuing such liberal Bonus and were probably influenced by Ajay Relan and Ashish Dhawan,who came on the Board of Directors,representing Citicorp and ChrysCapital respectively. 

ChrysCapital too made a fortune…investing on August 10,2008 ,Rs 50 crores for 2049180 shares at Rs 244 and with the subsequent bonus issues taking their holding to 18442620 shares reducing average holding cost to just Rs 27.11 per share.It then sold a total of  3041000 shares at average Rs 365.18/share to entities of the Government of Singapore Investment Corporation Pte Ltd on July 6 and July 11,2005.It was left with a holding of 11252620 shares

On March 28,2005,just before year closing,a Suzlon Group entity,Suzlon Capital sold 1245000  shares to 13 entities of the Parmar group for Rs 100/share aggregating an Investment of  Rs 12.45 crs.With the Bonus of 2:1 on June 24,2005 the Holdings shot up to 3735000 shares reducing the holding cost to Rs 33.33/share

SEBI has just directed a Suzlon IPO allottee,Himani Patel, to pay Rs 33.52 lakhs plus 10% Interest from October 19,2005 (Date of Listing) to actual date of Payment, for unlawful gains made in the Suzlon IPO 

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