atans1

GIC: Loss of S$5.2bn on combined UBS and Citi investments

In GIC on 26/07/2011 at 6:44 pm

(Note that on 27 July 2011 at 8.20am, I revised the article)

Using BT’s numbers that appeared in BT today, I calculated that GIC has a book loss of S$8.4bn on UBS, a profit of S$1.9bn on Citi and a paper profit of S$1.3bn. So this adventure in distress investing has not paid off yet. The net book loss is S$5.2bn.

GIC owns 245.48 million UBS shares, or a stake of 6.41 per cent in the bank, UBS’s latest annual report shows. That stake would be worth some 3.41 billion francs, at UBS’s share price of 13.88 francs at 9.30pm Singapore time yesterday. Even after including the 1.98 billion in coupon payments that GIC received in the first two years of its investment in UBS, its paper loss is about 5.6 billion francs*, or 51 per cent of the original 11 billion francs.

By contrast, its current stake in Citi is showing a large paper gain.

After selling half its original stake in Citi for a profit of US$1.6 billion** in September 2009, GIC still owns 3.86 per cent of the bank’s ordinary equity – or about 112.095 million shares.

The average cost of those shares was US$29.50 each – after adjusting for a reverse split of Citi shares in May that merged every 10 of its shares into one share – based on information provided by GIC in September 2009.

At yesterday’s opening price of US$39.69 for Citi shares in New York, the shares would be worth about US$4.45 billion, compared to the US$3.31 billion cost of acquiring them, giving GIC a paper profit of US$1.14 billion***, or some 34 per cent.

(*S$8.4bn, **S$1.9bn, ***S$1.3bn)

About these ads
  1. Err, distressed investing is buying when assets have roughly hit bottom, and trading at prices at prices below book value or at least at historical lows. It’s when your wife threatens to divorce you if you so much as suggest buying those stuff. GIC and TH investment style is to buy assets when everyone is talking about them and then watching when things go bad and seeing the prices go down week after week. GIC’s adventure in big western banks is the typical script of this investing style. GIC’s profits in Citi were purely due to heng-suay. Contrast with Abu Dhabi’s sovereign fund which made a classic distress investing in Citi during the depths of the GFC, but after every world leader and their mothers were promising and executing their quantitative easing plans aka “money printing”. Abu Dhabi sovereign fund was opportunistic and sold off their Citi stake at roughly the same time as GIC (after the 1st phase of big rebound after a financial crisis), but made huge gains unlike GIC.

Leave a Reply

Fill in your details below or click an icon to log in:

WordPress.com Logo

You are commenting using your WordPress.com account. Log Out / Change )

Twitter picture

You are commenting using your Twitter account. Log Out / Change )

Facebook photo

You are commenting using your Facebook account. Log Out / Change )

Google+ photo

You are commenting using your Google+ account. Log Out / Change )

Connecting to %s

Follow

Get every new post delivered to your Inbox.

Join 209 other followers

%d bloggers like this: