Citi in $1.4bn loss over LyondellBasell
Citigroup is to suffer a $1.4bn loss on its loans to LyondellBasell, the chemical group that placed dozens of its subsidiaries under bankruptcy protection this week after failing to restructure $26bn in debt. Citi’s loss, to be recorded in Q4 results mainly as a loan loss reserve, will put further pressure on its Q4 earnings, to be announced Jan 22. Citi on Thursday said its gross exposure to LyondellBasell, which is controlled by billionaire Len Blavatnik through his Access Industries, was $2bn. However, Citi has already taken about $600m in writedowns and reserves over the past few months.
Could be that Citi will be under pressure before earnings are declared.
Options expire in January on the 16th, before Citi declares earnings. Often, there's a bounce in the stock market during options expiry week, some people call it the Max Pain Effect. I wonder how much of this bounce is due to earnings releases.
Most earnings releases come out either during option expiry week, or the week before. During the last year, several of the crack-ups seen in the markets occurred in direct relation to earnings. For instance, both BSC and LEH failed just before their scheduled release of earnings.
The option expiry week bounce might just be an aretfact of earnings coming out the week before option expiry.
Which brings up back to Citi and it's earnings. They come out the Thursday after option expiry. Maybe we won't see the option expiry week bounce this month.
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