CITIGROUP GETS ANOTHER HELPING HAND FROM US GOVERNMENT - The US government has agreed to prop up the troubled bank, Citigroup, with a guarantee of more than $300 billion against risky loans and securities. The US Treasury will also invest $20 billion in return for preferred shares in the bank. The group lost 60% of its market value in three days of panic stock selling last week. Under the deal, the US government will shoulder some losses from toxic debt. Citigroup will not have to make any management changes but it has agreed to tighter restrictions on executive pay and to try to modify troubled mortgages in its $306 billion portfolio. The latest move follows a $25 billion injection of public funds in the bank last month. Last week the company announced 52,000 job losses worldwide, on top of 23,000 job cuts previously announced.
Analyst James Hughes, from CMC Markets in London, says the latest rescue deal had been expected as Citibank shares had slumped so much in the last week. He says that when a major US financial institution loses that much money in that short space of time, the US Federal Reserve comes running. But he says the big worry at the moment is the fact that people are not calling this nationalisation and how far a government can go before people start calling these types of moves nationalisation. He says it seems that more money is being pumped in from the Fed, this time saving Citibank shareholders.
The analyst says that if Citibank was to fail, the consequences would have been very bad for banks and stock markets worldwide. He points out that the bank has seen its market capitalisation fall by $160 billion this year and says that one of the biggest companies in the world has seen a 'remarkable decline'. But he adds that the move will not have a calming effects on world markets today.
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CALL TO SPEED UP EIB PAYMENTS - The European Investment Fund (EIB) is giving $30 billion in loans to small and medium businesses in Europe.T he loans are given to business through commercial banks. The EIB says it has had initial negotiations with several Irish banks, but Eoin Ryan, MEP for Dublin, wants the banks and the EIB to intensify these talks to get the money into the market as soon as possible.
Eoin Ryan says that small to medium sized businesses in Ireland need the money today and the longer they are restricted by funding, the more damage that will be done. He says he is to raise the matter with the relevant European Commissioners to speed up the payment of the funds so as businesses and workers will feel more secure about their future. There are some restrictions to the funds - they can not be used for businesses in the arms, tobacco and gambling industries.
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MORNING BRIEFS - IEX listed Merrion Pharmaceuticals has signed a deal worth $58m with Danish firm Novo Nordisk to develop and commercialise Insulin that's taken orally. Novo will pay for the development and commercialisation of the product, while Merrion will be responsible for its manufacture.
*** Saudi Arabia has cut interest rates from 4 to 3% and taken steps to boost liquidity and encourage lending. It also reduced the cash reserve requirements for banks, seen as a way to improve the availability of credit. The Gulf region has been hit by a huge fall in oil prices. Oil is around two thirds lower than in July when a record of above $147 a barrel was hit.
***On the currency markets today, the euro is trading at $1.2670 cents and 84.67 pence sterling.
