NEW YORK — Citigroup’s stock sank Monday to its lowest levels since November as investors wondered how much more cash the troubled bank will need.
Citigroup, in an effort to raise capital, is hammering out a deal to sell the bulk of its retail brokerage to Morgan Stanley.
The joint venture — expected to be announced later this week — would lead to an after-tax gain for Citigroup of about $5 billion to $6 billion, a person close to the negotiations said Monday. The person spoke on condition of anonymity because he was not authorized to discuss the ongoing talks.
But maintaining cash levels that are high enough to make up for upcoming loan losses remains a big challenge for Citigroup.
“While we believe this deal will provide some near-term capital relief, more likely will be needed,” Meredith Whitney, a financial analyst at Oppenheimer & Co., wrote.
Citigroup stock fell $1.15, or 17 percent, to $5.60 Monday, making it by far the steepest decliner among the 30 stocks that make up the Dow Jones industrial average — even though many industry analysts were positive about the deal.
Morgan Stanley shares fell 27 cents to $18.79. Most bank stocks tumbled Monday after President-elect Barack Obama said he plans to change the way the second half of the government’s $700 billion financial bailout fund is spent. He said he will target housing and small businesses.
