Citigroup Inc., the bank that's lost more than any other in the collapse of the mortgage market, fell in New York trading after predicting ``substantial'' additional writedowns and more losses on consumer loans.
The company, whose value has dropped by a third this year, declined 4 percent on the New York Stock Exchange after Chief Financial Officer Gary Crittenden made the forecast in a conference call with investors.
Citigroup has booked more than $42 billion of credit losses and writedowns since last year because of the credit market contraction, or about 10 percent of the $396 billion racked up by banks worldwide. Vikram Pandit, who took over as chief executive officer in December, has raised $44 billion in capital and outlined plans for the company to reduce assets by $400 billion over the next two to three years.
``We will continue to have substantial additional marks on our subprime exposure this quarter,'' Crittenden said on the call, which was sponsored by Deutsche Bank AG. ``We may continue to see the magnitude of the marks decline, as the exposures that we have have declined.''
Citigroup, based in New York, fell 81 cents to $19.59 in composite trading at 2:13 p.m., after reaching $19.41 earlier today, the biggest decline among the top five U.S. banks.
Second-quarter markdowns related to subprime mortgages won't be as large as the $6 billion recorded for the first quarter, Crittenden said. Citigroup may also have to write down the value of assets backed by so-called monoline insurance companies such as Ambac Financial Group Inc., after they were stripped of their AAA credit ratings, the 54-year-old CFO said.
`Similar' Cost
Citigroup last quarter recorded a cost of $1.5 billion to account for the reduced likelihood that the insurers will be able to pay. The company may have a ``similar'' cost in the second quarter, Crittenden said.
``It is obviously another setback,'' said Marshall Front, who oversees $700 million as chief executive officer of Front Barnett Associates in Chicago, including Citigroup shares. ``The subprime issue is lasting longer than some had thought and may extend into 2009. It's difficult to know when we are going to see that begin to stabilize.''
Total credit costs, including loan write-offs and reserves for future losses, may exceed those reported for the first quarter, Crittenden said. The company had $5.6 billion of such costs in the first quarter, after a record $7.3 billion in the fourth quarter of last year, according to the firm's financial statements.
``This quarter will still have some of the same challenges that we had in the prior quarter, but it will also, I believe, represent sequential improvement over the prior quarter,'' Crittenden said. The bank expects to build reserves during 2008, particularly in its U.S. mortgage portfolio, he said.
Leveraged Loans
On leveraged loans, Crittenden said the bank expects writedowns to be smaller than the $3.1 billion of markdowns taken in the first quarter.
``The marks in this quarter are unlikely to be of that same magnitude, but again they are still sizable marks,'' he said.
Citigroup is making ``good'' progress in disposing of the $400 billion in assets targeted by Pandit, Crittenden said.
The company has also said it's looking to sell its German consumer lending unit, and ``there's a lot of interest from different parties,'' Crittenden said.
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