MercoPress. South Atlantic News Agency

Citigroup record losses and cash injection promises

The US largest banking organization Citigroup has reported record 9.83 billion US dollars net loss for the last three months of 2007. Chief executive Vikram Pandit said Tuesday the loss had been caused by 18.1 billion US dollars exposure to bad mortgage debt and was “clearly unacceptable”.

The company said revenues during the fourth quarter fell 70% from a year earlier to 7.2 billion. Mr Pandit who a month ago took over as CEO has pledged to turn around Citigroup's fortunes. Citigroup has 200 million customer accounts in 100 countries and assets of 2.4 trillion US dollars. It was also announced that Citigroup is going to receive a cash injection of 6.88 billion US dollars from Singapore government investment agency GIC. This follows a similar 7.5 billion investment in Citigroup from another government agency, the Abu Dhabi Investment Authority, last November. The firm also said that it would be cutting its dividend for the quarter by 41%, from 54 cents to 32 per share, as well as raising 14.5 billion by selling securities, which includes the investment from GIC. "We have begun to take actions to ensure that Citi is well positioned to compete and win across our franchises while effectively keeping a tight control over our business risks," said Mr Pandit. Mr Pandit took up the CEO job following the departure of his predecessor, Charles Prince, who had resigned in November after the full extent of Citigroup's sub-prime mortgage losses began to emerge. The sub-prime market is focused on providing loans to those with limited or poor credit histories. During the US housing boom, this market expanded significantly. But a series of interest rate rises over two years meant many sub-prime borrowers could no longer afford their monthly payments, causing them to default on loans. Citigroup is far from alone in being hit by bad debt, but its write-off is by far the biggest announced by any bank to date. Analysts generally welcomed the results, as the 18.1 billion US dollars bad debt write down was less than market expectations of 20 billion. However, analysts had mixed views on what message cutting the dividend and selling securities sent to the market. Despite press reports that Citigroup would announce more than 20,000 job losses, none have so far been revealed. Other subprime losses unfolding so far include UBS, 14 billion US dollars; Morgan Stanley, 9.4 billion; Merrill Lynch, 8 billion; HSBC, 3.4 billion; Bear Sterns, 3.2 billion; Deutsche Bank, 3.2 billion; Bank of America 3 billion; Barclays 2.6 billion; Royal Bank of Scotland, 2.6 billion; Freddie Mac, 2 billion; Credit Suisse, 1.6 billion; Wachovia, 1.1 billion; IKB, 2.6 billion and Paribas, 439 million US dollars. In related news Swiss investment bank UBS has warned that it does not know what the final financial impact of the US sub-prime mortgage crisis may be. UBS has written off about 14 billion US dollars in debts linked to sub-prime loans. The bank wants shareholder support to sell a 9% stake to the Singapore government, and 1.5% to another buyer. Its comments come as a report says that US investment firm Merrill Lynch is facing higher sub-prime related losses than previously estimated.