$10 billion loss rattles Citigroup
The nation's biggest bank announced a $10 billion fourth-quarter loss, primarily because of an $18 billion write-down of assets related to subprime mortgages. The size of the write-down dwarfed Citigroup's October estimate of up to $11 billion in subprime-related losses. In a bad day for financial-company stocks in general, Citigroup fell $2.12 to close at $26.94 on the New York Stock Exchange Tuesday, a drop of 7.3 percent.
Pandit, who became CEO in December, termed the results "unacceptable" and told analysts that "we need to do better, and we will do better."
Shaken by the erosion of its capital in recent months, Citi struck a deal for a $12.5 billion cash infusion from the sovereign investment funds of Singapore, Kuwait, a New Jersey state fund, a domestic investment fund and two men already heavily committed to the success of the bank: Saudi Prince Alwaleed bin Talal, who owns about 4 percent of Citi stock, and former Citigroup CEO Sandy Weill.
The bank also said it plans to sell $2 billion of new shares to the public and cut its quarterly dividend from 54 cents a share to 32 cents, saving $5 billion a year. The moves come weeks after Citi announced a $7.5 billion cash infusion from the government investment fund of Abu Dhabi.
As a cost-cutting move, Citi announced it would lay off 4,200 employees out of more than 300,000 employed worldwide. Chief Financial Officer Gary Crittenden warned that further layoffs could be ahead. Last spring, the bank announced a staff reduction of 17,000. In addition to the $18 billion subprime write-down, Citigroup also boosted its loan-loss reserves by $4 billion to cover anticipated losses on consumer loans.
Citigroup announced a fourth-quarter net loss of $9.8 billion, or $1.99 a share, versus earnings of $5.1 billion or $1.03 a share a year earlier. Revenue fell 70 percent to $7.2 billion.
Standard & Poor's downgraded the bank's credit rating, citing a negative outlook for 2008.
Citigroup was not the only financial firm drawing aid from foreign investors. Merrill Lynch said it raised $6.6 billion from U.S., Japanese and Kuwaiti investors. Its shares fell 5.3 percent to close at $53.01 Tuesday.
Tom Kersting, an analyst with Edward Jones, maintained his "hold" rating on the stock. He described the write-downs as "a good, initial positive step towards addressing some of Citigroup's problems. The next phase, improving the fundamentals, is likely to be more challenging, not a quick fix."
WBJ Web Partners
Most Recent
Most Recent
0 Comments