Citigroup's options slip with its stock price

NEW YORK - Citigroup's options are dwindling along with its stock price as the credit landscape deteriorates and fears escalate about future loan losses at the company.

As the banking giant's shares slid below $4 yesterday, analysts said the company may be forced to merge or sell some prized businesses. Citigroup already has raised $75 billion in capital this year, including a $25 billion cash investment from the government. None of it has been enough to muster confidence.

Raising more money on the open market is "pretty much off the table" with shares so low, said William Fitzpatrick, an equity analyst at Optique Capital Management Inc. And raising more cash from outside investors or the government would be "a Band-aid."

The shares lost 94 cents yesterday to close at $3.77. They have shed about 60 percent of their value since Nov. 14.

Chief executive officer Vikram Pandit reiterated his support for the bank's current business model, but, the Wall Street Journal reported, the board of directors is considering whether to sell all or part of the company to raise money.

After the downfall this year of Bear Stearns Cos., Lehman Brothers Holdings Inc., and American International Group Inc., the market is losing confidence in yet another financial institution. And again, it has little to do with the company's current levels of cash - right now, Citigroup is practically swimming in capital.

What stockholders are worried about is the future. They are betting that all the risky debt sitting on Citigroup's balance sheet will eventually turn into losses as the economy worsens and the markets stay turbulent.

The company's bondholders also are growing anxious. That is reflected in the cost of bond insurance: The cost to insure against a Citigroup default on its bonds has more than doubled over the past week to $500,000 a year per $10 million of debt compared with $215,000 on Nov. 14.