Citi Takes Huge Loss on Subprime, Slashes Dividend

January 15, 2008 No Comments »

Citigroup recorded the worst quarterly loss in its storied history today, chalking up $18.1 billion in writedowns related to subprime related debt and boosting loan-loss reserves by $4.1 billion.

The New York-based bank and mortgage lender reported a net loss of $9.83 billion, or $1.99 per share for the fourth quarter, bringing net income to just $3.62 billion, or 72 cents per share for the whole of 2007.

During the same period a year ago, the company reported earnings of $5.13 billion, or $1.03 per share.

Citigroup’s revenue fell a whopping 70 percent to $7.22 billion, down from $23.83 billion in the fourth quarter of 2006.

Analysts surveyed by Thomson Financial expected the company to report a loss of $1 a share on revenue of $10.64 billion.

In a bid to raise much needed capital, the Board slashed its quarterly dividend 41 percent to 32 cents from 54 cents and will offer $2 billion in preferred securities.

The bank also said it had gathered $12.5 billion in additional capital from investors and shareholders, including $6.88 billion from the Government of Singapore Investment Corporation (GIC).

As of December 31, 2007, direct subprime exposure was $37.3 billion, including roughly $8 billion of gross lending and structuring exposures and around $29.3 billion of net ABS CDO super senior exposures, down from a total of $54.6 billion the prior quarter.

The company reported that 2.56 percent of its first mortgages were 90+ days delinquent, up from 2.09 percent the previous quarter, while second mortgage delinquencies rose 39 basis points, from 0.99 percent to 1.38 percent.

A hefty 7.83 percent of first mortgages with a Fico score below 620 (subprime mortgage) were similarly delinquent, along with 2.48 percent of second mortgages greater than 90% loan-to-value.

Additionally, the banking giant said it cut 4,200 jobs during the quarter and noted during the conference call that there would be more to come.

Shares of Citi were down $1.83, or 6.31%, to $27.23 in late morning trade on Wall Street, hovering above their 52-week low of $26.50.

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