Citicorp Faces Prospect Of Dropping Below $10
Unremitting selling pressure has pushed Citicorp's stock to the brink of the psychologically important support level of $10 a share.
Apart from the ignominy of the nation's largest bank becoming a single-digit stock, some analysts also expressed surprise - and concern - that Citicorp's stock has yet to stabilize following the release of third-quarter results.
Citicorp announced on Oct. 15 that it lost a stunning $885 million in the third quarter, and was suspending its common dividend.
Late Friday, Citicorp was trading at $10.25, off 12.5 cents, on volume of more than 2.6 million shares.
|Fears Tend to Propagate'
The last time Citicorp closed below $10 was in November 1980, according to a Citicorp spokeswoman.
When a stock keeps falling after the release of bad news, "fears tend to propagate," said Raphael Soifer of Brown Brothers Harriman. "That's what seems to be happening here" with Citicorp, he added.
Indeed, the market was rife last week with fresh rumors of liquidity problems at Citicorp's Citibank unit. On Friday, a Citicorp spokeswoman denied rumors that the bank was forced to borrow at the Fed's discount window.
"We're in a period of maximum fear and maximum uncertainty with Citicorp," said Frank DeSantis of Donaldson Lufkin and Jenrette.
"It's a very emotional period for the stock," he added.
$5 Price Seen Possible
Charles Peabody of Kidder, Peabody & Co. - a prominent bear on Citicorp stock - said he expects the company's share price to fall to as low as $5 a share by yearend, based on its dim earnings prospects.
"I can't see Citicorp making more than $2 a share until 1994 or 1995 at the earliest," he said. And with the dividend having been omitted, "you're not being paid to wait" for Citi to return to its historical profit levels, Mr. Peabody added.
What's more, Mr. Peabody believes Citicorp needs to raise more than $7 billion of fresh capital to cover its credit problems - several billion more than what Citicorp itself says is needed.
Considerable Capital Needs
Put another way: Mr. Peabody is saying Citicorp needs to raise more than twice the amount of its current market capitalization of roughly $3.5 billion.
"That's quite a tall order," said another analyst, who declined to express an opinion about Mr. Peabody's estimate of Citicorp's capital needs.
Some of the selling pressure on Citicorp is coming from institutional investors - particularly income funds - whose charters prohibit them from owning stocks that don't pay dividends.
Roughly half of Citicorp's common stock is held by institutional shareholders, but it couldn't be immediately learned how many of these holders must dump the stock now that it doesn't pay a dividend.
If Citicorp knows, it isn't talking.
A Citicorp spokeswoman said the company had no comment on the matter.
It's thought that some institutional holders might be swapping out of the common, and into Citicorp preferred stock, which does pay a dividend.
Gordon Matthews contributed to this article.