Citi’s Write Downs Continue


Citigroup, the largest bank in the U.S., is expected to take substantial second quarter write downs for subprime mortgages, leveraged buyout loans and other assets. The bank’s chief financial officer Gary Crittenden told investors via phone on Thursday that second quarter markdowns will be smaller than the first quarter, but substantial nonetheless. “The marks in this quarter are unlikely to be of that same magnitude, but again they are still sizable marks,” Crittenden said.

In the first quarter, Citigroup posted a $6 billion loss and the bank wrote down $1.5 billion for exposure to bond insurers.

Costs linked to worsening subprime credits could have a meaningful impact on Citigroup’s results for the rest of the year. “We will continue to have substantial additional marks on our subprime exposure this quarter,” Crittenden said. “We may continue to see the magnitude of the marks decline, as the exposures that we have have declined.”

Since last year, Citigroup has booked more than $42 billion of credit losses and write downs due to contraction in the credit market. The banks’ total losses amount to 10 percent of the $396 billion of losses by banks worldwide.

To address the problem, Crittenden says the bank is willing to look at acquisitions and will make them where it makes sense. The focus, however, is on improving performance.

Recently appointed Citigroup CEO, Vikram Pandit has been trying to spearhead a revival at the bank. Since taking office, Pandit 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.

“It is obviously another setback,” said Marshall Front, who oversees $700 million as CEO of Front Barnett Associates, 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.”