Recovery may take longer than usual: Greenspan

(Reuters) - Economic growth has stalled and recovery may take longer than usual, former Federal Reserve chairman Alan Greenspan said on Monday.

"As of right now, U.S. economic growth is at zero," Greenspan said at an investment conference in Jeddah, Saudi Arabia's second-largest city. "We are at stall speed."

"Recovery might take longer to emerge than it usually does," he added.

The longer growth stays at zero, the more likely the world's largest economy would start to contract, he said, adding that globalization of trade could ease some shocks.

"Growing globalization of trade and the economy would facilitate the absorption of shocks in the U.S.," he said.

In updated economic forecasts released last week, the U.S. central bank lowered its outlook for 2008 growth by a half percentage point to between 1.3 percent and 2 percent, citing the prolonged housing slump and bottlenecks in credit markets.

 

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Visa sets possible record $18.8 billion IPO

(Reuters) - Visa Inc, the world's largest credit-card network, on Monday said it may raise up to $18.8 billion in its eagerly awaited public sale of shares, which could make it the largest initial public offering ever.

The company filed with the U.S. Securities and Exchange Commission to sell 406 million Class A shares at $37 to $42 each, resulting in proceeds of $15 billion to $17.1 billion. It said it might sell another 40.6 million shares to meet demand, boosting the potential size of the IPO to $18.8 billion.

A successful IPO would surpass the $10.6 billion offering in 2000 by AT&T Wireless Group.

San Francisco-based Visa plans to list its shares on the New York Stock Exchange under the symbol "V."

The timing of Visa's offering is risky, as worries that the U.S. economy might be entering a recession have chilled investor demand for stocks and IPOs.

But shares of smaller rival MasterCard Inc (MA.N: Quote, Profile, Research) have more than quintupled since that card network went public in a $2.4 billion IPO in May 2006.

"MasterCard has been an explosive stock, and investors may hope Visa will be the same," said Steve Roukis, a managing director at Matrix Asset Advisors Inc in New York, which invests $1.7 billion.

Visa intends to set aside $3 billion of net proceeds to cover a wide variety of antitrust and other litigation.

 

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Citigroup May Post First-Quarter Loss, Whitney Says

 (Bloomberg) -- Citigroup Inc., the biggest U.S. bank by assets, may post its second-straight quarterly loss because of writedowns on home-equity loans and junk-grade corporate loans, Oppenheimer & Co.'s Meredith Whitney said.

The bank may post a loss of $1.6 billion, or 28 cents a share, for the first quarter, compared with a profit of about $5 billion, or $1.01, a year earlier, Whitney wrote today in a note to clients. The prediction compares with the 63-cents per share average of 12 analyst estimates surveyed by Bloomberg.

The rate of loan losses is ``grossly underestimated by consensus estimates'' at Citigroup and other U.S. banks, Whitney wrote. ``Core fundamentals are rapidly deteriorating.'' She cut her per-share estimate for 2008 earnings by more than 70 percent to 75 cents. The New York-based company's shares could fall more than 36 percent to less than $16, she wrote. They've declined about 15 percent this year.

Citigroup posted a $9.8 billion loss for the fourth quarter, the widest in its 196-year history, after writing down subprime mortgage-linked collateralized debt obligations whose value plummeted last year as investors shunned securities linked to the least creditworthy borrowers. Vikram Pandit stepped in as chief executive officer in December, after Charles O. ``Chuck'' Prince was forced to resign.

Whitney was among the first analysts to gauge the depth of Citigroup's losses, writing in a note last October that the bank may have to cut dividend payments to shareholders for the first time since the 1990s. In January, the bank slashed its dividend by 41 percent, reversing a pledge made by its executive- committee chairman, former U.S. Treasury Secretary Robert Rubin, to preserve the shareholder payout.

 

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Ambac Rises on $3 Billion Rescue to Avert Downgrade

 (Bloomberg) -- Ambac Financial Group Inc. rose to the highest in two weeks on investor expectations the bond insurer may be rescued from crippling credit-rating downgrades by getting $3 billion in new capital.

Ambac, the second-biggest bond insurer after MBIA Inc., may announce an agreement this week, according to a person with knowledge of the discussions who declined to be named because the details aren't complete. The New York-based company plans to raise $2.5 billion by selling stock at a discount to existing shareholders and $500 million from issuing debt, the Wall Street Journal reported today, citing people familiar with the matter.

``Maybe we'll see light at the end of the tunnel soon,'' said Geraud Charpin, head of European credit strategy at UBS in London. ``That would be good news for banks.''

Citigroup Inc. and seven other banks are working with Ambac to prevent rating cuts that would throw doubt on the credit quality of the $553 billion of municipal and asset-backed securities it guarantees. Banks stand to lose as much as $70 billion from any downgrades to Ambac, MBIA Inc. and FGIC Corp., Oppenheimer & Co. analysts estimated. Ambac rose as much as 6 percent before the official start of trading in New York.

The stock was 69 cents higher at $11.40 at 7:35 a.m., the highest since Feb. 11. Ambac jumped 16 percent in New York Stock Exchange trading on Feb. 22 after CNBC Television said banks and Ambac were preparing a deal.

Ambac spokeswoman Vandana Sharma didn't return a voicemail and e-mail seeking comment before office hours today.

Bank Talks

Rating companies are demanding bond insurers add more capital or face downgrades because of losses on subprime- mortgage securities they guaranteed. Moody's Investors Service indicated it will decide whether to cut Ambac and Armonk, New York-based MBIA by the end of the month. A downgrade of all the firms would cast doubt on $2.4 trillion of securities they back.

New York Insurance Superintendent Eric Dinallo last month arranged a meeting with banks to help avoid a downgrade of the bond insurers. Dinallo told a congressional hearing this month that the companies may be forced to separate their municipal insurance business from their asset-backed guarantees.

``Ambac was among the neediest cases, so if they can pull it off, there's hope for the others,'' said Jim Reid, credit strategist at Deutsche Bank AG in London.

CDO Losses

Banks face losses from any rating cuts because they bought bond insurance to hedge the risks of collateralized debt obligations and other asset-backed securities that are now tumbling in value. CDOs package pools of securities then split them into pieces with different ratings.

UBS AG, Royal Bank of Scotland Group Plc, Wachovia Corp., Barclays Plc, Societe Generale SA, BNP Paribas SA and Dresdner Bank AG were also involved in the group discussing a rescue, said the person.

Dresdner, the German banking arm of Allianz SE, will contribute a ``small'' investment of ``two-digit million euros,'' Stefan Jentzsch, head of the Dresdner Kleinwort investment-banking unit, said at a press conference in Frankfurt today.

``We have long been waiting for banks to pay up,'' Philip Gisdakis, a Munich-based credit analyst at UniCredit SpA, Italy's biggest bank, wrote in a note to investors today. A ``solution without their participation would lead to large losses for them.''

Spokespeople for Citigroup, UBS, Wachovia and BNP declined to comment on the rescue plans. Spokespeople for RBS, Barclays and Societe Generale didn't immediately return e-mails or calls seeking comment.

FGIC Split

FGIC, which lost its top rating at Moody's last week, asked to be split into two separate businesses, one that insures municipal bonds and another for asset-backed securities. That would help protect municipal bonds from losses on the asset- backed debt.

Channel Reinsurance Ltd., a reinsurer for MBIA, had its top Aaa credit rating cut by Moody's on Feb. 22 because of a slump in the value of residential mortgage securities.

The rating was cut three levels to Aa3 with a negative outlook, Moody's said in a statement. Channel Re provides more than half the reinsurance bought by MBIA, according to MBIA filings. MBIA said last week all bond insurers must eventually divide their businesses.

 

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