No dividend cut at Citi

Ananth - I would disagree with Citi being up the creek. Fundamentals of this company are strong. Slashing the dividend would have caused an inordinate amount of doubt among investors as to Citi’s strength and would have resulted in a selloff. Going in the hole to maintain confidence might be good strategy in the long run once the market correction ends.

Why dont they cut the damn dividend to zero to shore-up their capital? Everyone knows citi is up shit-creek, so why do the posturing? I think the system of “wall Street Analysts expectation” is the root the problem in the US, where each company takes more and more risks to exceed these “expectations” and thereby boost the stock price. Too much pressure on the CEO’s, every quarter, causes them to screw-up.

In Citi’s case the analysts should expect nothing and ease-off. Then Citi need not show a dividend and still maintain its stock price. How can you loose 5 bill, borrow 6 bill at high intrest rates, and then pay a 32 cent dividen to prove that you are doing well and can beat analysts expectations! If you dont pay a dividend, you can borrow less and thereby strengthen the company. Oh! But wall street knows best!

It’s hard to imagine how Citigroup and JPMorgan can generate inspiring profits when the cost of the money is so high and the loans they lent to many carry a lower % rate. Is it just me who thinks this?