Fears for Citigroup and Bank of America due to nationalisation rumours

| January 15, 2009 | 0 Comments

US banking giant Citigroup saw its shares plummet 21% in early trading today due to rumours that the group could be nationalised.

Furthermore, analysts at Bank of America issued a sell note for Citigroup, attributing to the fall in its share price.

Wall Street also panicked over the financial health of Citigroup and its balance sheet. The bank has already received $45 billion (£30 billion) from the US Government.

Yesterday, the bank sold its 100% stake in broker Smith Barney, Smith Barney Australia and Quilter in return for a 49% stake in a new partnership with Morgan Stanley called Morgan Stanley Smith Barney, and $2.7 billion in cash.

Meanwhile, shares in Bank of America took a battering as there is also speculation that the institution could be taken into public ownership. Many believe that the bank was over-ambitious with a number of deals last year.

Earlier this week, it was announced that Merrill Lynch and Bank of America are preparing to axe almost 2,000 staff in London.

Merrill Lynch agreed to an all-share bailout by Bank of America just days after the collapse of Lehman Brothers. The deal was finalised on January 1 but there is speculation that Bank of America requires billions more dollars to fund the bailout.

However, according to a report in the Wall Street Journal, insiders close to the situation said the US Government was close to completing a deal that would give billions to Bank of America to help it close its acquisition of Merrill Lynch.

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