Re: Citigroup acquires China’s bad assets worth 36.4 billion yuan
Ylle wrote:
May I tug someone’s sleeve with an Financial Issues 101 question? Why would a company want to acquire bad loans like this? How do they make money off it?
Because you hope you can buy them at a price below what you might actually recover. From the POV of the bank holding the bad loans, it’s a way to get some mistakes behind you, and from the POV of the buyer, it’s a speculative gamble.
As Alan Abelson used to say in an old Barron’s ad, you buy a stock because you think it’s going to go up, but you’re usually buying it from someone who thinks it’s going to go down. Markets are fun!
Doug