Goldman Sachs took the knife to its Wall Street rivals yesterday, predicting that the credit crunch would force Citigroup to slash its dividend by 40 per cent, reports The Times .
At the same time it emerged that Merrill Lynch was preparing to cut 1,600 jobs from its trading desks.
William Tanona, a leading Goldman Sachs analyst, said that Citigroup, the world’s largest bank, would have to cut its payout to shareholders to preserve its capital position and write off $18 billion (£9 billion) of assets in the fourth quarter, compared with earlier estimates of $11 billion.
Goldman said that Citigroup would need fresh capital of between $5 billion and $10 billion in addition to a recent $7.5 billion commitment from the Abu Dhabi Investment Authority. Under that deal, the Abu Dhabi sovereign wealth fund is protected from a possible dividend cut, as it bought Citigroup bonds convertible into stock. The bonds, which will vest into a 5 per cent shareholding on conversion, pay an annual coupon of 11 per cent, compared with the existing dividend yield for shareholders of 7.3 per cent. Citigroup’s largest shareholders include Capital Research & Management, with 4.6 per cent, Prince Alwaleed bin Talal, who controls 3.97 per cent, and Barclays Global Investors, with 3.76 per cent.
ASIAN STOCKS TUMBLED OVERNIGHT as investors reacted to the assassination of Pakistani opposition leader Benazir Bhutto, which has plunged the country into turmoil, reports The Guardian.
European shares also fell this morning, with the FTSE 100 down 0.65% at 6,455.7 in early trading. Germany's DAX fell 0.5% while France's CAC 40 was down 0.6%.
Japan's benchmark Nikkei index dropped 1.7% on its last trading day in 2007. It was down 11.1% for the year at 15,307.78, the first annual decline in five years and putting it on track to be the world's worst-performing major stock market this year. The Nikkei is now closed until next Friday.
Shares in Australia, South Korea, Hong Kong and New Zealand also fell, with benchmark indices down between 0.3% and 1.7%. The Dow Jones industrial average was down 1.4%, or 192.08 points, at 13,359.61.
FURTHER INTEREST RATE CUTS are unlikely to spark a big recovery in the housing market next year, Nationwide has warned, as prices fell for the second consecutive month in December, reports The Telegraph.
In its latest report, Britain's largest building society said that average house prices across the nation dropped 0.5pc in December - pushing annual house price inflation down by nearly 2pc.
The annual rate has now fallen back to 4.8pc, down from 6.9pc last month, and 10.5pc in December last year.
Fionnuala Earley, Nationwide's chief economist, said: "Most indicators now show that demand is responding to the pressures of weak affordability, past increases in interest rates and the lower house price expectations that we had expected to take hold earlier in the year.
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