Citigroup’s Loses $10 Billion

Today is Reckoning Day for Citigroup (C). The company just reported its worst loss ever. Thanks to subprime investments gone bad, Citigroup incurred a write down of $18 billion. For the quarter, Citi lost nearly $10 billion, or $1.99 a share. That’s like burning $100 million every day. I think it’s safe to assume that Citigroup tried to thorw out as much garbage as it could, but I still expect to see more. The Street was looking for a loss of $1.03 a share. For last year’s Q4, Citi reported a profit of $1.03 a share.
The company also said that it will cut its quarterly dividend from 54 cents a share to 32 cents a share. That’s not as bad as I thought. Going by yesterday’s close, that implies a yield of 4.4% which beats most of the yield curve. Citigroup also announced job cuts of 4,200.
The big problem for Citigroup is its eroding capital base. That’s why it has turned again to outside investors for a capital infusion. The Wall Street Journal reports:

A new round of investments announced Tuesday includes $12.5 billion of preferred securities. The Government of Singapore Investment Corp., or GIC, will buy $6.88 billion, which follows the government fund’s plan to invest $9.6 billion in Switzerland’s UBS AG. Other investors include former Chairman and Chief Executive Sandy Weill and Prince Alwaleed bin Talal bin Abdulaziz Alsaud, already one of Citi’s biggest investors.
Citigroup also announced it would offer public investors about $2 billion in newly issued convertible preferred securities.

I thought the last bit was interesting. I’m not sure how much demand there is from investors to sink more money into Citigroup, but we’ll find out.

Posted by on January 15th, 2008 at 8:18 am


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