United States banking titan Citigroup may have to write off $15-billion in soured investments including mortgage losses in coming months, a report by Goldman Sachs predicted on Monday.
Citigroup, the US’s second-largest bank by market worth, is already reeling from its exposure to the US housing downturn and tighter credit markets.
The banking behemoth is searching for a new CEO after Charles Prince stepped down on November 5 as Citigroup revealed it was facing likely investment write-offs of between $8-billion and $11-billion.
Analysts at Goldman Sachs believe the company could be forced to absorb bigger write-offs.
”We currently assume Citigroup will take an $11-billion write-off in the fourth quarter of 2007, at the high end of the firm’s guidance, and we also assume an additional $4-billion write-off in the first quarter of 2008,” the Goldman analysts said.
The analysts cut their rating on Citigroup’s stock to a ”sell” recommendation, saying the bank ”will likely face an increasingly challenging operating environment which is likely to pressure results in many of their businesses”.\
Citigroup made $2,4-billion in net profit during the third quarter, but its profits slowed dramatically due to pre-tax losses of $1,56-billion and other losses and writedowns totaling almost $2-billion.
New York-based Citigroup said earlier this month that further write-offs would likely act as a drag on its fourth-quarter earnings.
The Goldman analysts have trimmed their 2008 earnings forecast for Citigroup markedly to $3,80 per share compared with a prior assumption of $4,65.
Citigroup and major Wall Street financial firms are vying to bolster their finances, which have been stressed by the housing-market slump and credit-market crunch.
The property downturn and surging home foreclosures, particularly on subprime home loans made to Americans with patchy credit histories, have triggered mounting multibillion-dollar losses for banks that traded such mortgages during the property boom.
The Goldman analysts said they ”do not expect a ‘quick fix’ to some of Citi’s issues”, adding that ”the lack of leadership at this point in Citi’s storied history could not have come at a worse time”.
Citigroup’s shares were down 5% at $32,30 in early-afternoon deals. That was 42% below the level of almost a year ago, when it traded at $55,70. — Sapa-AFP