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Citi loses almost $10B, slashes dividend
By MADLEN READ, AP Business Writer 20 minutes ago
NEW YORK - Citigroup Inc. lost almost $10 billion in last year's final three months, the largest quarterly deficit in the bank's 196-year history, and slashed its dividend as it recorded a mammoth write-down for bad bets on the mortgage industry.
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The nation's largest bank wrote down the value of its portfolio by $18.1 billion. It also boosted loan-loss reserves by $4.1 billion, signaling further problems in its consumer businesses as deflated home prices, high energy and food costs, and rising unemployment weigh on people's ability to make their loan payments.
To cut expenses, it slashed 4,200 jobs in the fourth quarter in addition to the 17,000 layoffs announced in the spring, and chief financial officer Gary Crittenden said during a conference call that more job cuts would be on the way.
Chief Executive Vikram Pandit, who replaced Charles Prince in December, said the fourth-quarter results were "unacceptable", and that he was "not yet finished" in his review of whether any of the global bank's core operations need to be cut or sold.
To bolster its capital, the bank also said Tuesday it has lined up $12.5 billion in new investments from sovereign wealth funds and existing shareholders.
That includes $6.88 billion from the Government of Singapore Investment Corp. for a 4 percent stake. Other investors were Capital Research Global Investors, Capital World Investors, the Kuwait Investment Authority, the New Jersey Division of Investment, shareholder Prince Alwaleed bin Talal of Saudi Arabia and former chief executive Sanford Weill and his family foundation.
The $12.5 billion in fresh equity adds to the $7.5 billion that Citi got in November from the Abu Dhabi Investment Authority in exchange for a 4.9 percent stake in the company.
Citigroup's shares, which were trading around $55 a year ago, fell 56 cents to $28.50 in premarket trading on Tuesday.
The loss for the quarter totaled $9.83 billion, or $1.99 per share, compared with earnings of $5.13 billion, or $1.03 per share, during the same quarter a year earlier. Citigroup's revenue fell to $7.22 billion, down 70 percent from $23.83 billion in the final quarter of 2006.
Citigroup said the 41 percent cut in its quarterly dividend to 32 cents a share from 54 cents — along with the Asian investments and a stock offering of about $2 billion — will help boost its Tier 1 capital ratio, a measure of its financial strength.
Financial companies have been the highest dividend-paying sector in the stock market, but many — including Washington Mutual Inc., National City Corp. and the government-sponsored lenders Freddie Mac and Fannie Mae — have pared those payouts in recent months.
Citigroup's decision to cut its dividend and seek new cash from outside investors was widely anticipated on Wall Street after months of scrutiny over the bank's deteriorating operations. The biggest was Citigroup's bad bets on mortgage-backed bond instruments called collateralized debt obligations. It also was forced to bring $49 billion in hemorrhaging funds known as structured investment vehicles onto its books.
Over the past several weeks, Asian funds have been buying up the battered stocks of struggling U.S. banks. Early Tuesday, Merrill Lynch said it will receive a total of $6.6 billion from the Korean Investment Corp., Kuwait Investment Authority and Japan's Mizuho Corporate Bank — in addition to the $4.4 billion it has already gotten from Singapore's state-run Temasek Holdings.
Pandit said Citigroup would continue to sell off "non-core" assets. The bank has already sold shares in Redecard, a card business in Latin America, and an ownership interest in a unit of the Japanese brokerage Nikko Cordial it bought last year.
Citigroup's $18.1 billion writedown was significantly wider than the $6 billion writedown it took in the third quarter last year, and bigger than the $8 billion to $11 billion it guessed in October that it would take for the fourth quarter.
Citigroup said as of Dec. 31, it had a total of $37.3 billion in direct subprime mortgage exposure, down from $54.6 billion three months prior.
By MADLEN READ, AP Business Writer 20 minutes ago
NEW YORK - Citigroup Inc. lost almost $10 billion in last year's final three months, the largest quarterly deficit in the bank's 196-year history, and slashed its dividend as it recorded a mammoth write-down for bad bets on the mortgage industry.
ADVERTISEMENT
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The nation's largest bank wrote down the value of its portfolio by $18.1 billion. It also boosted loan-loss reserves by $4.1 billion, signaling further problems in its consumer businesses as deflated home prices, high energy and food costs, and rising unemployment weigh on people's ability to make their loan payments.
To cut expenses, it slashed 4,200 jobs in the fourth quarter in addition to the 17,000 layoffs announced in the spring, and chief financial officer Gary Crittenden said during a conference call that more job cuts would be on the way.
Chief Executive Vikram Pandit, who replaced Charles Prince in December, said the fourth-quarter results were "unacceptable", and that he was "not yet finished" in his review of whether any of the global bank's core operations need to be cut or sold.
To bolster its capital, the bank also said Tuesday it has lined up $12.5 billion in new investments from sovereign wealth funds and existing shareholders.
That includes $6.88 billion from the Government of Singapore Investment Corp. for a 4 percent stake. Other investors were Capital Research Global Investors, Capital World Investors, the Kuwait Investment Authority, the New Jersey Division of Investment, shareholder Prince Alwaleed bin Talal of Saudi Arabia and former chief executive Sanford Weill and his family foundation.
The $12.5 billion in fresh equity adds to the $7.5 billion that Citi got in November from the Abu Dhabi Investment Authority in exchange for a 4.9 percent stake in the company.
Citigroup's shares, which were trading around $55 a year ago, fell 56 cents to $28.50 in premarket trading on Tuesday.
The loss for the quarter totaled $9.83 billion, or $1.99 per share, compared with earnings of $5.13 billion, or $1.03 per share, during the same quarter a year earlier. Citigroup's revenue fell to $7.22 billion, down 70 percent from $23.83 billion in the final quarter of 2006.
Citigroup said the 41 percent cut in its quarterly dividend to 32 cents a share from 54 cents — along with the Asian investments and a stock offering of about $2 billion — will help boost its Tier 1 capital ratio, a measure of its financial strength.
Financial companies have been the highest dividend-paying sector in the stock market, but many — including Washington Mutual Inc., National City Corp. and the government-sponsored lenders Freddie Mac and Fannie Mae — have pared those payouts in recent months.
Citigroup's decision to cut its dividend and seek new cash from outside investors was widely anticipated on Wall Street after months of scrutiny over the bank's deteriorating operations. The biggest was Citigroup's bad bets on mortgage-backed bond instruments called collateralized debt obligations. It also was forced to bring $49 billion in hemorrhaging funds known as structured investment vehicles onto its books.
Over the past several weeks, Asian funds have been buying up the battered stocks of struggling U.S. banks. Early Tuesday, Merrill Lynch said it will receive a total of $6.6 billion from the Korean Investment Corp., Kuwait Investment Authority and Japan's Mizuho Corporate Bank — in addition to the $4.4 billion it has already gotten from Singapore's state-run Temasek Holdings.
Pandit said Citigroup would continue to sell off "non-core" assets. The bank has already sold shares in Redecard, a card business in Latin America, and an ownership interest in a unit of the Japanese brokerage Nikko Cordial it bought last year.
Citigroup's $18.1 billion writedown was significantly wider than the $6 billion writedown it took in the third quarter last year, and bigger than the $8 billion to $11 billion it guessed in October that it would take for the fourth quarter.
Citigroup said as of Dec. 31, it had a total of $37.3 billion in direct subprime mortgage exposure, down from $54.6 billion three months prior.
Citigroup invested heavily in sub-prime mortgage debt
CITIGROUP 
Mr Pandit faces a tough job in turning around Citigroup's fortunes
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