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Citigroup Falls to Lowest Since '98 on Loss Estimates (Update2)
By Bradley Keoun
March 4 (Bloomberg) -- Citigroup Inc. dropped to the lowest in nine years in New York trading after two analysts predicted a first-quarter loss and a Middle Eastern investment fund said the biggest U.S. bank needs more capital.
The shares fell 99 cents, or 4.3 percent, to $22.10 as of 4 p.m., the lowest price since 1998. They have tumbled 25 percent this year, the second-worst performance among the 30 members of the Dow Jones Industrial Average after Intel Corp. New York-based Citigroup was the worst performer last year, when it fell 47 percent.
Citigroup may have $15 billion of writedowns this quarter tied to subprime mortgages and so-called collateralized debt obligations, leaving the bank with a net loss of $1.66 a share, Merrill Lynch & Co. analyst Guy Moszkowski said today in a note. Moszkowski, ranked the No. 1 bank analyst by Institutional Investor magazine, was followed by a Goldman Sachs Group Inc. analyst who said the bank would lose $1 per share.
``We remain concerned'' about the potential for loan losses, Moszkowski said. ``The company still has quite a way to go'' before its $37 billion of holdings of subprime loans and related bonds are written down to the current market value.
Bank spokesman Michael Hanretta declined to comment on the analysts' reports. Asked whether the bank needs to raise more capital, Hanretta referred to comments by Chief Financial Officer Gary Crittenden on a Jan. 15 conference call with analysts. Crittenden said then that the bank had raised enough from outside investors to address any shortfall that resulted from additional writedowns.
Analysts' Estimates
Citigroup is expected to have a first-quarter profit of 34 cents a share based on the average of 13 analysts' estimates compiled by Bloomberg.
Goldman analyst William Tanona issued a note correcting his previous estimate for a profit of 15 cents a share. The earlier projection was based on a ``miscalculation in our model,'' he said. Tanona's office referred questions to Ed Canaday, a Goldman spokesman, who declined to comment beyond the note.
Moszkowski previously estimated a first-quarter profit of 55 cents a share. His new prediction approaches the record $1.99 a share loss that the bank reported for the fourth quarter of last year.
Oppenheimer & Co. analyst Meredith Whitney, who correctly predicted last year that Citigroup would have to cut its dividend, said in February that the bank's losses may force it to reduce the dividend again or sell assets to shore up capital. In January, Citigroup lowered its dividend by 41 percent, the first reduction since the modern company was formed from the 1998 merger of Citicorp and Travelers Group Inc.
Abu Dhabi
Citigroup raised $7.5 billion in November from Dubai's neighboring emirate, Abu Dhabi, after record mortgage losses wiped out almost half the company's market value and led to the departure of Chief Executive Officer Charles Prince. The company said in January it was getting another $14.5 billion from investors, including the governments of Singapore and Kuwait.
``It will take a lot more than that to rescue Citi and other financial institutions,'' Sameer al-Ansari, the chief executive officer of Dubai International LLC, said today at an investment conference in the Middle Eastern emirate. The fund is one of several controlled by Dubai ruler Sheikh Mohammed bin Rashid al- Maktoum.
Merrill's Moszkowski said he believes Citigroup has a capital cushion of about $17 billion ``above and beyond'' what was needed to offset writedowns recorded last year.
During the January conference call, Crittenden said the bank had ``stress-tested'' projections for its capital needs against a range of economic conditions, including ``multiple recessionary scenarios.''
``We have quantified what we believe the most significant risk exposures are for the company,'' Crittenden said. They include declines in prices for subprime mortgages, loans to companies with credit ratings below investment grade and the bankruptcies of bond insurers.
http://www.bloomberg.com/apps/news?pid=20601087&sid=afhyOQcsgJM4&refer=home
By Bradley Keoun
March 4 (Bloomberg) -- Citigroup Inc. dropped to the lowest in nine years in New York trading after two analysts predicted a first-quarter loss and a Middle Eastern investment fund said the biggest U.S. bank needs more capital.
The shares fell 99 cents, or 4.3 percent, to $22.10 as of 4 p.m., the lowest price since 1998. They have tumbled 25 percent this year, the second-worst performance among the 30 members of the Dow Jones Industrial Average after Intel Corp. New York-based Citigroup was the worst performer last year, when it fell 47 percent.
Citigroup may have $15 billion of writedowns this quarter tied to subprime mortgages and so-called collateralized debt obligations, leaving the bank with a net loss of $1.66 a share, Merrill Lynch & Co. analyst Guy Moszkowski said today in a note. Moszkowski, ranked the No. 1 bank analyst by Institutional Investor magazine, was followed by a Goldman Sachs Group Inc. analyst who said the bank would lose $1 per share.
``We remain concerned'' about the potential for loan losses, Moszkowski said. ``The company still has quite a way to go'' before its $37 billion of holdings of subprime loans and related bonds are written down to the current market value.
Bank spokesman Michael Hanretta declined to comment on the analysts' reports. Asked whether the bank needs to raise more capital, Hanretta referred to comments by Chief Financial Officer Gary Crittenden on a Jan. 15 conference call with analysts. Crittenden said then that the bank had raised enough from outside investors to address any shortfall that resulted from additional writedowns.
Analysts' Estimates
Citigroup is expected to have a first-quarter profit of 34 cents a share based on the average of 13 analysts' estimates compiled by Bloomberg.
Goldman analyst William Tanona issued a note correcting his previous estimate for a profit of 15 cents a share. The earlier projection was based on a ``miscalculation in our model,'' he said. Tanona's office referred questions to Ed Canaday, a Goldman spokesman, who declined to comment beyond the note.
Moszkowski previously estimated a first-quarter profit of 55 cents a share. His new prediction approaches the record $1.99 a share loss that the bank reported for the fourth quarter of last year.
Oppenheimer & Co. analyst Meredith Whitney, who correctly predicted last year that Citigroup would have to cut its dividend, said in February that the bank's losses may force it to reduce the dividend again or sell assets to shore up capital. In January, Citigroup lowered its dividend by 41 percent, the first reduction since the modern company was formed from the 1998 merger of Citicorp and Travelers Group Inc.
Abu Dhabi
Citigroup raised $7.5 billion in November from Dubai's neighboring emirate, Abu Dhabi, after record mortgage losses wiped out almost half the company's market value and led to the departure of Chief Executive Officer Charles Prince. The company said in January it was getting another $14.5 billion from investors, including the governments of Singapore and Kuwait.
``It will take a lot more than that to rescue Citi and other financial institutions,'' Sameer al-Ansari, the chief executive officer of Dubai International LLC, said today at an investment conference in the Middle Eastern emirate. The fund is one of several controlled by Dubai ruler Sheikh Mohammed bin Rashid al- Maktoum.
Merrill's Moszkowski said he believes Citigroup has a capital cushion of about $17 billion ``above and beyond'' what was needed to offset writedowns recorded last year.
During the January conference call, Crittenden said the bank had ``stress-tested'' projections for its capital needs against a range of economic conditions, including ``multiple recessionary scenarios.''
``We have quantified what we believe the most significant risk exposures are for the company,'' Crittenden said. They include declines in prices for subprime mortgages, loans to companies with credit ratings below investment grade and the bankruptcies of bond insurers.
http://www.bloomberg.com/apps/news?pid=20601087&sid=afhyOQcsgJM4&refer=home
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