Citigroup loses $10B in 4th quarter


Published: Wednesday, January 16, 2008 at 6:01 a.m.
Last Modified: Wednesday, January 16, 2008 at 12:00 a.m.

NEW YORK - Bad bets on mortgages led to a $10 billion loss for Citigroup Inc. in the final quarter of last year, the largest in its 196-year history. As a new wave of weak economic data intensified fears of a recession, the nation's biggest bank also cut jobs, slashed its dividend and turned to foreign investors for an infusion of cash.

The biggest hit came from a $18.1 billion write-down in the value of its investment portfolio. But the bank also set aside $4 billion on Tuesday to cover anticipated losses on loans to U.S. consumers - a sign that deflated home prices, high energy and food costs, and rising unemployment are making it difficult for many customers to keep up with their payments.

The news sent Citigroup's shares skidding 7 percent, wiping away almost $10 billion in market value on top of the $125 billion the shares already have lost during the past year. Citigroup's tumbling shares helped send the Dow Jones industrial average plunging more than 230 points Tuesday when the government reported that retail sales fell in December and inventories of unsold goods piled up at manufacturers and wholesalers, signs that consumers are pulling back their spending.

Citigroup's chief financial officer Gary Crittenden startled analysts on a conference call by saying the bank doesn't expect the housing industry to stabilize soon. He predicted already slumping U.S. home prices could fall 7 percent further this year and by a similar amount in 2009.

Citigroup added to that total on Tuesday by saying it cut 4,200 jobs in the fourth quarter, separate from the 17,000 layoffs announced in the spring. Crittenden said Citigroup will cut more jobs, too. The bulk of the cuts have and will continue to be traders and investors in markets and banking - the main source of the bank's losses.

The losses also forced Citigroup to seek fresh capital again. The $12.5 billion it announced Tuesday includes $6.9 billion from the Government of Singapore Investment Corp. for a 4 percent stake. Other investors are 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.

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