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XFN> Citigroup shares slide as bank mulls merger, asset sales [JFWDDHM]
NEW YORK, Nov 21, 2008 (Reuters via COMTEX) -- Citigroup Inc shares fell sharply again on Friday as the second-largest U.S. bank by assets mulled a variety of options including a possible merger or asset sales to restore the bank's health and investor confidence, a source said.
The stock fell 76 cents, or 16 percent, at $3.95, after rising as high as $5.53 in early trade. Shares remained far below their close last week at $9.52.
The cost to protect Citigroup debt against default rose, suggesting that fixed-income investors see increased risk.
Citigroup is looking at options including a sale of parts of the company, or a merger with another company, a person familiar with the matter said on Thursday.
The company has repeatedly declined to comment on its plans, beyond its announcement earlier this week that it will shed 52,000 jobs and move tens of billions of dollars of troubled securities onto its balance sheet. It said it has "very strong capital and liquidity" levels.
Chief Executive Vikram Pandit told employees on Friday that the bank will not spin off its Smith Barney brokerage, and that "rumor-mongering" is at the heart of Citigroup's problems, CNBC television reported.
The bank is also pushing the U.S. Securities and Exchange Commission to reinstitute a temporary ban on the short-selling of financial stocks, a person familiar with the matter said on Thursday. Citigroup believes short-sellers are contributing the sharp decline in its stock price, according to the source.
The cost to protect its debt was $425,000 annually to protect $10 million of debt against default for five years, up from $395,000 annually on Thursday, according to Phoenix Partners Group.
On Thursday, Saudi Prince Alwaleed bin Talal said he planned to increase his stake in Citigroup to 5 percent from less than 4 percent. The bank's largest individual investor called Citigroup's shares "dramatically undervalued."
Citigroup's market value was $25.7 billion as of Thursday's close, down $48.7 billion this month, and down about a quarter trillion dollars since late 2006.
Thursday's market value was barely above the $25 billion that Citigroup received as part of the government's $700 billion financial industry rescue package. Citigroup said it has also raised another $50 billion of capital from other investors since the middle of 2007.