Citigroup Posts Record $18 Billion Loss

Citigroup Inc., operating as Citi and the mother company of CitiBank, posted the biggest loss in the bank's 196-year history as rising defaults on home loans forced it to write down the value of subprime-mortgage investments by $18 billion.

The fourth-quarter net loss of $9.83 billion, or $1.99 ashare, compared with a profit of $5.1 billion, or $1.03, a year earlier. Citigroup reduced its dividend by 41 percent and is selling $14.5 billion of preferred stock to investors including the government of Singapore and two Arabian financial firms - Abu Dhabi Investment Authority, the investment arm of the United Arab Emirate Abu Dhabi government and Kingdom Holding Company owned by Prince Al-Waleed bin Talal ofSaudi Arabia - to shore up the company's depleted capital.

Citigroup fell 7.3 percent on the New York Stock Exchange today as the largest U.S. bank warned of rising loan delinquencies on its $214 billion portfolio of home loans and also stated that more credit card and autoloans were going bad. The bank cited a slowing economy in setting aside $5.2 billion to cover loan losses in its U.S.consumer division, about five times the year-earlier amount. The markdown on subprime home loans, almost double what the company had forecasted in November, was the biggest amount so far among the world's top financial companies, far exceeding the $14 billion write-off taken by Zurich-based UBS, Europe's largest bank.

Citigroup also announced it will eliminated 4,200 jobs (a little over 1% of its workforce) and plans to make more cuts in the near future. Many of the jobs to be eliminated are in the investment banking division. The investment banking division contributed an $11 billion loss to Citigroup for 2007, compared to a profit of $1.75 billion in 2006.

Standard & Poor's reduced its long-term rating on Citigroup to AA- from AA reflecting the severe losses and the probability that the bank's 2008 performance will continue to be below par for some time to come.

The fourth quarter is shaping up to be the worst earnings period for thefinancial industry since the Great Depression. More bad news expected shortly to come in the financial industry:

• Merrill Lynch & Co., the largest U.S. brokerage firm, is expected to report a record loss of more than $3 billion after writing down mortgage-related securities.
• Bank of America Corp., the second-largest U.S. bank, may report an 80 percent drop in fourth- quarter net income next week.
• JPMorgan Chase & Co., the third-biggest U.S. bank, may post a 31 percent decline in earnings as early as tomorrow.

According to Forbes Global 2000 in March 2007, Citigroup is the largest company in the world with total assets of US $2.4 trillion, 375,000 employees, and operations in over 100 countries around the world.