Wells Fargo Is Bad, But Citi Is Worse

Tyler Durden's picture

Earlier we reported that Wells Fargo may have an energy problem because as CFO John Shrewsbury revealed, of the $17 billion in energy exposure, "most of it" was junk rated.

But, while one can speculate what the terminal cumulative losses, cumulative defaults and loss severities on this loan book will be, at least Wells was honest enough to reveal its energy-related loan loss estimate: it was $1.2 billion, or 7% of total - as Mike Mayo pointed out, one of the highest on the street. Whether it is high, or low, is anyone's guess, but at least Wells disclosed it.

Citi did not.

Yes, the bank did disclose its holdings to the oil and gas sector at $21 billion funded and $58 billion which included unfunded (watch that unfunded exposure collapsing and shrinking the available pool of shale company liquidity in the coming weeks), and it did announce that it "built roughly $300 million of energy-related loan loss reserves this quarter", but paradoxically one thing it did not disclose was its total reserves to energy.

Note the following perplexing exchange between analyst Mike Mayo and Citi CFO John Gerspach:

<Q - Mike Mayo>: Can we move to energy, though? I don't want you being the only bank not disclosing reserves to energy - oil and gas loans. I mean, I think most others have disclosed that who have reported so far. And I mean, your stock's down 7%. The whole market is down a whole lot, but I don't - even if it's a low number, it can't hurt too much more from here. And so can you - how much in oil and gas loans do you have, and what are the reserves taken against that? I know you were asked this already, but I'm going back for a second try.


<A - John C. Gerspach>: When you take a look at the overall portfolio, Mike, we've reduced the amount of exposure. Our funded exposure to energy-related companies this quarter is down 4%. It's about $20.5 billion. The overall exposure also came down about 4%. The overall exposure now is about $58 billion, that includes unfunded. When you take a look at the composition of the funded portfolio, about 68% of that portfolio would be investment grade. That's up from the 65% that we would have had at the end of the third quarter. And the unfunded book is about 87% investment grade. So while we are taking what we believe to be the appropriate reserves for that, I'm just not prepared to give you a specific number right now as far as the amount of reserves that we have on that particular book of business. That's just not something that we've traditionally done in the past.

And yet all other reporting banks have done it not only in the past, but this quarter as well.

One wonders just how much of Gerspach's decision was dictated by the Fed's under the table suggestion to avoid mark to market in energy entirely, and thus to stop marking its loan book. To be sure, without knowing the total amount of reserves to oil are, one simply can't do any calculations on Citi's total energy book, even if the once already bailed out bank so eagerly provided the incremental addition to this reserve. As if that number is in any way helpful.

Finally, we eagerly await for someone from the Dallas Fed to contact us and to comment on our article from yesterday that the "Dallas Fed Quietly Suspends Energy Mark-To-Market On Default Contagion Fears." Because with megabanks such as Citi refusing to disclose energy losses, the longer the Fed remains mute on just what it knows that nobody else does, the more concerned the market will be that the subprime crisis is quietly playing out under its nose all over again.

But one thing is certain: the panic can begin in earnest when Janet Yellen says, at the next Fed press conference, that "energy is contained."

Comment viewing options

Select your preferred way to display the comments and click "Save settings" to activate your changes.
johngaltfla's picture

But the Bernank promised my already sore investing asshole that it was "contained" and I could go all in and make my 401K an 802K!?!?!?

hedgeless_horseman's picture



The overall exposure now is about $58 billion, that includes unfunded. When you take a look at the composition of the funded portfolio, about 68% of that portfolio would be investment grade. That's up from the 65% that we would have had at the end of the third quarter. And the unfunded book is about 87% investment grade.

Investment grade?

Are these not rated by the very same rating agencies that gave essentially every MBS a AAA rating, for a fee, just about 10 years ago? 

If they are going to rate AAA, "dog shit wrapped in cat shit," then God only know what is underlying "investment grade."

I don't know about black swans, but I sure do recognize a unicorn when I see one.

philipat's picture

It is already impossible to read the financial condition of ANY TBTF Bank from its Balance Sheet. It is what is NOT on the Balance Sheet which will cause the problems. Meanwhile, it's best just to stay away until perhaps one day GAAP and MtM get restored. And I'm not holding my breath....

hedgeless_horseman's picture




DEFINITION of 'Investment Grade'


A rating that indicates that a municipal or corporate bond has a relatively low risk of default. Bond rating firms, such as Standard & Poor's, use different designations consisting of upper- and lower-case letters 'A' and 'B' to identify a bond's credit quality rating. 'AAA' and 'AA' (high credit quality) and 'A' and 'BBB' (medium credit quality) are considered investment grade. Credit ratings for bonds below these designations ('BB', 'B', 'CCC', etc.) are considered low credit quality, and are commonly referred to as "junk bonds".

Manthong's picture

The fun will start when they go at each other’s throats to collect on all their failing CDS’s and other synthetic naked bets.

Since they know they cannot possibly hope to collect from themselves, they cannot pull the scam again with .gov and the Fed is stretched out beyond imagination, they will just look to rob their customers. er, I mean unsecured creditors.

When that time comes, there should not be a lamp post surrounding any money center bank that is not decorated with a banker ornament, or for that matter a regulator one.


Boris Alatovkrap's picture

But, but, but, FDIC is protect citizenry from bad gamble of bankster, no?

Manthong's picture

A few banks a month, maybe.

All the money center banks.. certainly not.

“The FDIC goes on to suggest that its current tools and business model are “not sufficient to mitigate the complexities of large institution failures.””


I know you knew that already, but many do not..

glenlloyd's picture

Yeah, it's been a while since the FDIC said they didn't have the ability to resolve a large institution failure.

This was something that Dodd / Frank was suppose to fix, no more bailouts for large institutions.

I've already written my Senators about reigning in the Dallas Fed on this BS. It will do a lot more damage to start lying about the situation in an attempt to keep people from finding out.

It's time for the Fed to stop participating in the selection of winners and losers. Some people have made bets on those loans going south, the Fed getting in there and intervening only changes the situation.

Congress has to put their foot down on this, get the Fed out of the biz of telling lies and picking winners.

Manthong's picture

get the Fed out of the biz.

I think the period should be placed after "biz".

AGuy's picture

"But, but, but, FDIC is protect citizenry from bad gamble of bankster, no?"

It appears FDIC has been made irrelevant now that the Frank-Dodd Depositor Bail-in Law has taken effect. I guess we'll have to wait for some bank failures to find out.


hedgeless_horseman's picture



...they cannot pull the [bailout] scam again with .gov...

I will take that bet.

Bailout is the name of the game.

6.  Read The Creature from Jekyll Island: A Second Look at the Federal Reserve - 5th Edition, by G. Edward Griffin.

Privatize the gains; socialize the losses.

Manthong's picture

OK, OK..  .gov can load up on all the debt it wants and the only people that will suffer are the ones not close to the front of the distribution chain.

Actually, it’s the ones closest to the front who prosper, the ones furthest don’t care because everything is free and it’s the ones in the middle that take the pipe.

But here is the real ball buster from all that way back when…

“…Rhode Island Senator, Nelson Aldrich, whose daughter married John D. Rockefeller Jr, “invited men he knew and trusted, or at least men of influence who he felt could work together: Abram Piatt Andrew, assistant secretary of the Treasury; Henry P. Davison, a business partner of JP Morgan's; Charles D. Norton, president of the First National Bank of New York; Benjamin Strong, another Morgan friend and the head of the Bankers Trust; Frank A. Vanderlip, president of the National City Bank; and Paul M. Warburg, a partner in Kuhn, Loeb & Co. and a German citizen.”:

“Paul Warburg was the actual mastermind behind the FED. Interestingly, his main partner at Kühn, Loeb & Co, Jakob Shiff, had just financed the Japanese war against the Russian Tsar; he would later channel 20,000,000 US dollars via a Russian exile living in Brooklyn by the name of Lev Davidovich Bronstein (better known as Leon Trotsky) to ensure the 1917 victory of the Bolshevik Revolution.”


PaperTaperFakerCaper's picture

Hmmm... by coincidence I just earlier read this:


Now, now; I'm not some blind anti-Semite, for sure.  In the article, the same kind of statement is made about Rothschild and Kuhn Loeb.  There's a fascinating historical dimension to this:  the Ashkenazim are just getting even with Russia for taking over their homeland Khazaria (overlaps current day Ukraine).  These are the same (Ashkenazim) who populated Europe and adopted Judaism, then became the Zionists.  So, the article concludes that the Zionist claim to the Holy Land for Israel is false.  The Ashkenazim are the original "nomads", the ultimate adapters.  The main characters of Bolshevism were all Ashkenazim.  Revenge, Part 1.  Mission Accomplished.  The article purports that they have taken over a lot of what we call Western power.  Ukraine... Part 2?  Witness how well Israel wags the U.S. doggy.  Woof!!!! 



Manthong's picture

You might have a point there.

If not, there are sure a lot of co-incidences.

Psychopathic nature and pure greed tops my list, though.

orez65's picture

"But Citi Is Worse"


jmcadg's picture

Somewhere I read/heard that US 401K accounts were down £400k. Does that make them 1k accounts!!! It was probably all a dream/nightmare.

Yen Cross's picture

  At least Wells took the " pain pill" when they reported last week. Citi just blew smoke up everyone's asses. I'll bet JPM is even uglier as people start looking deeper under the hood.

Manthong's picture

I just can’t get over all the Nervous Nellies and Debbie Downers I see out there.

Shirley they have passed all the required “stress tests” and are well prepared for the imminent Liquidity Zombie Apocalypse.


Yen Cross's picture

 I hope it's fast Manthong. Unfortunately, the global credit wad has been blown. [ no offense ladies]

 I suspect, it's going to be an long slog down...

orez65's picture

Hey!! Obama just said that the economy is awesome!!!!

knukles's picture

Citi ALWAYS blows smoke.  ALWAYS. 
Not only do they blow smoke, the general feeling one gets speaking to insiders is that the largest problem is that the whole place is far too large and run by small fiefdoms to be able to get a real handle on what is occurring in totality.  And it's a political turf nightmare.  There's an old saying about Citi;  They fight one another during the week and plot fighting the competition on weekends.
But not all's bad.  Only been bailed out 5 times or so in the last 30 or so years.

DeadFred's picture

Was the last time about 6 years ago? Just wondering...

vincent's picture

Compartmentalization equals plausible deniability, and is the working MO for much of the criminal upper echelon.

They'll be kicking eachother right in the teeth to get to the lifeboat as their ships gloriously sink.

Please, just let one of these houses blow up



hedgiex's picture

Include Deutsche to the list. It take the tropies with its derivatives book.

Latina Lover's picture

In other words, get your money out of these banks before it is 'bailed in', aka directly stolen by the banksters.

Everyman's picture

GOOD ADVICE!!!  CITI and WELLS are both pretty bad off with their MTMyth so called Assets, both RE and Energy.  Remember it is porbaly 10-30 times worse than what they are admitting.  That is the way these assholes operate. 

Mentaliusanything's picture

It"s worth what I say It's worth damn it

and that is...

A snow balls chance in Hell

Boris Alatovkrap's picture

Are you aware what Snow Ball is go for in hell?! Is prize commodity!

Dickweed Wang's picture

In other words, get your money out of these banks before it is 'bailed in', aka directly stolen by the banksters.


LMFAO!!!  Are you serious?  The sheeple in the USA were stupid enough to put the money there in the first place and then stupid enough to keep it there after they were robbed via TARP in 2008/2009 so you think any of them are going to have the foresight to take action before it's too late?  No way Jose . . . anyone with ANY money currently in a TBTF bank deserves to have every cent taken from them.  It's called culling the herd . . . .

DeadFred's picture

You'll have about a week from the first nasty blow until everything is frozen. Don't dally once you see it coming.

techpriest's picture

In 2008 I moved my savings to a local bank, out of Wachovia, and it saved my ass just two months ahead of their collapse. Looks to be time to take similar actions now.

Panic now and avoid the rush!

Cognitive Dissonance's picture

'They' will continue to change the rules to keep it from blowing up.

khnum's picture

Im afraid young Skywalker that the Debt Deathstar mother of all margin calls is now fully operational

22winmag's picture

The shitty ratings agencies will fool people for the banks.


They call a shitty-diaper financial products AAA solid gold.

nmewn's picture

"Nothings wrong with Citi. I've talked to my people. Don't sell Citi!!!" - Jam Krammer

booboo's picture

Citi has been a rotting corpse for years, just bury the fucker already, even the banker cabal knows this and will kick it overboard soon enough.

tarabel's picture



It's getting so bad that they're thinking about renaming it Kardashian Trust.

ebworthen's picture

Another bailout flunkie that deserves to be drawn-and-quartered in the public square.

El Vaquero's picture

Yes.  And then scattered to the four corners of the world. 

CHoward's picture

The legs are starting to come off of everything.

1stepcloser's picture

the lipstick is worn off the pig...or squid..

tc06rtw's picture

 …  do squids have lips?

El Vaquero's picture

I fucking hate Citi with a passion.  I want to see it raining bankers. 

buzzsaw99's picture

that's the nice thing about being a tbtf banks. you can just pretend you never made the loan. it's not like they had to work for the money.

Yen Cross's picture

  That's a very good point buzz. Not to detract, in any way from the intelligent posters @ Z/H.

 It's important that people understand the difference between funded and unfunded liabilities.

 Funded is your credit line or loan.[ borrower]

[Bank] >  Unfunded liability is not only underwriting exposure, but also guaranteeing  specific risks for shareholders.

buzzsaw99's picture

You take the blue pill—the story ends, you sit in your office and believe your AFS is worth whatever you want to believe it's worth. [/Morpheus the TBTF banker]

hedgiex's picture

Yes tbtf banks can have their own mark to market models. Marking to their own myths.

NoWayJose's picture

As long as we are talking idiots, why would Pittsburgh send 3 of their 4 receivers 20+ yards down field on a Fourth and Five? Result was obvious - a sack!

booboo's picture

Cause Big Ben likes to force the spread on and off the field?