AT the end of 2006, Citigroup Inc was the fourth-largest company in the Standard & Poor's 500 Index, with a market value of US$274 billion, almost four times that of Apple Inc. Now investors say the maker of iPods is worth US$7.7 billion more than the biggest financial services provider.
Citigroup, reeling from the collapse of the subprime mortgage market, has lost 13 percent in value since reporting the biggest quarterly loss in its 196-year history in January. That followed a 47-percent drop last year. Even after a 26-percent decline in its own shares this year, Apple has a market value of US$129.3 billion to Citigroup's US$121.6 billion.
The shrinking of Citigroup underscores the devastation that has rocked the financial industry, highlighted by the Federal Reserve-managed takeover of Bear Stearns & Co last month. Apple, on the verge of bankruptcy 10 years ago, has emerged as a technology star under Chief Executive Officer Steve Jobs, Bloomberg News said. Its shares more than doubled last year.
"The market looks at what Steve Jobs has done and what he's likely to do," said Michael Holland, who oversees more than US$4 billion as chairman of Holland & Co in New York. "The market is valuing that far more than the financial assets of Citigroup."
Holland sold his Citigroup shares a year and a half ago because he felt the "prospects were pretty lousy" and instead bought JPMorgan Chase & Co shares. He also holds Apple and Google Inc, owner of the most popular Internet search engine.
"While we don't comment on our stock price, Citi remains focused on serving customers and implementing the priorities Vikram Pandit has developed, including better managing the firm's capital resources and risk management for improved profitability, stability and future growth," spokesman Michael Hanretta said.
Subprime writedowns
New York-based Citigroup, whose market value dipped below US$100 billion on March 17 for the first time since 1998, now ranks 19th globally by that measure. Among the other companies that have overtaken it in the last quarter are International Business Machines Corp, Coca-Cola Co and JPMorgan.
Citigroup fell 35 cents to US$23.36 last Friday in New York Stock Exchange composite trading. Apple fell US$7.41 to US$147.14 on the Nasdaq Stock Market.
Of 29 analysts tracked by Bloomberg News, 26 recommend investors buy Apple shares, two suggest holding and one says sell. Seven analysts recommend investors buy Citigroup's shares, five say hold and six suggest selling.
Citigroup, the biggest bank by assets since the merger of Citicorp and Travelers Group Inc in 1998, took US$24 billion in subprime writedowns and cut its dividend 41 percent in January, the first cut since Citigroup was formed.
CEO Charles O. "Chuck" Prince quit in November and was replaced by Vikram Pandit, who has cut about 6,000 jobs and plans more cuts.
The bank may be poised to dispose of more than US$200 billion of loans and securities to shore up its capital, a person with knowledge of the plans said last month.
The slump in market capitalization puts Citigroup behind technology firms that slid this year, including Google and Cisco Systems Inc, according to data.