If Citi gets sued by New York, what could happen to the stocks? Should I sell before that happens?

MichaelShulman answered 4 months ago …

Citi has bigger long-term problems than this impending law suit.

We've just seen the tip of its balance-sheet problems which will impact C's stock value. And reduced stock prices for outfits means it will have to dilute shares more than ever to raise capital.

Every piece of data available shows that loans of all sorts -- small business, construction, credit card, auto and now prime mortgage -- are deteriorating at an accelerating rate. This means the ongoing ability of banks -- especially investment banks -- to generate profits is now the big question.

How can Citi replace profits previously earned through IPOs (which are down), private-equity deals (which have all but dried up), securitizing mortgages (never again!) and securitizing corporate debt (dormant) for the foreseeable future? It can't.

In addition, new Fed regulations will reduce the leverage Citi and other banks can use to generate business and profits for several years, if not longer.