Citi buyout could boost Goldman, Morgan Stanley: CreditSights

NEW YORK (Reuters) - CreditSights said an acquisition of Citigroup Inc by Goldman Sachs or Morgan Stanley would significantly add to earnings, if Citi's bad assets were absorbed by the U.S. government.

"A potential acquisition of Citigroup would be significantly accretive to Goldman and Morgan Stanley's earnings as the potential buyer would be acquiring a significant future earnings stream for a relatively low price," said analyst David Hendler, in a research note.

"However, the potential need for mark-to-market adjustment on Citi's $2 trillion balance sheet would likely cause capital adequacy concerns for most buyers sans a government backstop," said Hendler, in the note dated November 22.

Citigroup's shares fell 60 percent last week to $3.77.

Citigroup's executives last week debated options as the company's share price sank, including merging with another bank or selling off businesses.

Citigroup also spoke to the Federal Reserve and the U.S. Treasury last week about the government making a public statement of support and perhaps even putting additional funds into the bank.

(Reporting by Euan Rocha; Editing by Bernard Orr)