Wednesday, December 24, 2008

Mark-To-Market Liabilities - Citibank

From Citi's 10Q:

This is impossible to read without double clicking the schedule.  So here is the line, and it was $1.3 billion at 12/2007 and $2.2 billion at 9/2008, for 9/2008.
This may or may not be all there is. However, these particular fair value marks aren't counted in Tier 1 Capital. This schedule breaks out the components of Tier 1 Capital and therefore has the figure I'm looking for. Or something close to it.

I like the way the line reads -- attribtable to own (lack of) credit worthiness.  I also don't know exactly how one values one's debts to "market".  Does one simply look it up as a traded bond?  Or is this simply a haircut based on credit spreads from credit derivatives.  One could even imagine a bond selling for more then par -- what to do then?  

It isn't unreasonable for a firm that has assets like bonds issued by other banks that just got a haircut to want the same treatment for its own debt.  It's never that simple and the bond assets might be supported by deposits and the debt stands on its own  -- so they couldn't simply sell the asset to buy the debt in the open market.  In fact, if they had the cash to redeem the debt, it would probably be at par or par plus call provisions.  Really bad companies can do tenders on their own debt for, say 60%.  Like Level 3's recent tender.  

This is just an interim piece while I figure things out.  This is the best I could do in an hour, although I suppose I could have copied a lot of quotes on fair value.

One thing I will say is that this isn't something that Citi seems to want to make easy to understand and find.   Actually, there is a HUGE amount of information in these statements.  I wonder if management, outside of the financial reporting guys, actually read this stuff.    

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