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KEY PROBLEM: Much of Citigroup's trouble is related to collateralised debt obligations linked to lower-quality mortgages, which were once considered rock solid. -- PHOTO: BLOOMBERG NEWS
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NEW YORK - CITIGROUP'S problems deepened, as its nearly pristine credit ratings were downgraded and with the United States banking giant unable to assure investors that a potential US$11 billion (S$16 billion) write-down for US sub-prime mortgages will not grow.
'There's no way I think anyone can give you an assurance of how things are going to move,' Citigroup chief financial officer Gary Crittenden said at a conference call on Monday. 'We've taken what we think is a reasonable stab.'
Citigroup's struggles came as it faced a leadership void, following the resignation of chairman and chief executive Charles Prince on Sunday.
Mr Prince left after a four- year tenure during which the bank's stock fell 17 per cent amid criticism that Citigroup had grown unwieldy and lacked direction. Some investors want the bank, which has US$2.35 trillion in assets, to be broken up.
Former US Treasury secretary Robert Rubin, who led the bank's executive committee, was named chairman. Sir Winfried Bischoff, head of the European business, became acting chief executive.
Citigroup shares closed down US$1.83, or 5 per cent, at US$35.90 on Monday on the New York Stock Exchange - a 4 1/2-year low.
News of the expected write- down of US$8 billion to US$11 billion, on top of an earlier US$6.5 billion, helped drag down shares of Bank of America, Goldman Sachs, Merrill Lynch and Morgan Stanley. Investors are worried that write-downs for US sub-prime mortgages and other debt may not be isolated.
Analysts said Merrill,which ousted its chief executive last week, may add to its own announced US$8.4 billion write- down.
Moody's Investors Service cut Citigroup's credit rating one notch to Aa2, its third-highest rating, from Aa1. Fitch Ratings made a similar downgrade - to AA from AA-plus - citing 'severe pressure' on capital markets operations and 'an inhospitable consumer credit environment' as mortgage delinquencies soar.
Both agencies' rating outlooks are 'negative', meaning further cuts are possible within two years.
Much of Citigroup's trouble is related to US$43 billion of collateralised debt obligations, which are linked to lower-quality mortgages. While the securities were once considered rock solid, Mr Crittenden said investors have stopped buying them.
Meanwhile, Saudi Prince Alwaleed bin Talal, Citigroup's largest individual investor, endorsed bringing back Mr Sanford Weill, who built Citigroup and handpicked Mr Prince to succeed him, to run the company on an interim basis, CNBC television said.
Mr Weill said he was not interested, but will do what is needed to help.
REUTERS
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