NEW YORK - US banking titan Citigroup may have to write off 15 billion dollars in soured investments including mortgage losses in coming months, a report by Goldman Sachs predicted Monday.
Citigroup, America's second-largest bank by market worth, is already reeling from its exposure to the US housing downturn and tighter credit markets.
The banking behemoth is searching for a new chief executive officer after former CEO Charles Prince stepped down on November 5 as Citigroup revealed it was facing likely investment writeoffs of between eight and 11 billion dollars.
Analysts at Goldman Sachs believe the company could be forced to absorb bigger writeoffs.
"We currently assume Citigroup will take an 11 billion dollar writeoff in the fourth quarter of 2007, at the high end of the firm's guidance, and we also assume an additional four billion dollar writeoff in the first quarter of 2008," the Goldman analysts said.
The analysts cut their rating on Citigroup's stock to a "sell" recommendation, saying the bank "will likely face an increasingly challenging operating environment which is likely to pressure results in many of their businesses."
Citigroup made 2.4 billion dollars in net profit during the third quarter, but its profits slowed dramatically due to pre-tax losses of 1.56 billion dollars and other losses and writedowns totaling almost two billion dollars.
New York-based Citigroup said earlier this month that further writeoffs would likely act as a drag on its fourth-quarter earnings.
The Goldman analysts have trimmed their 2008 earnings forecast for Citigroup markedly to 3.80 dollars per share compared with a prior assumption of 4.65 dollars.
Citigroup and major Wall Street financial firms are vying to bolster their finances which have been stressed by the housing market slump and credit market crunch.
The property downturn and surging home foreclosures, particularly on subprime home loans made to Americans with patchy credit histories, have triggered mounting multibillion losses for banks that traded such mortgages during the property boom.
The Goldman analysts said they "do not expect a 'quick fix' to some of Citi's issues," adding that "the lack of leadership at this point in Citi's storied history could not have come at a worse time."
Citigroup's shares were down 5.0 percent at 32.30 dollars in early afternoon deals. That was 42 percent below the level of almost a year ago, when it traded at 55.70 dollars.
aa-jjc/pmh
11/19/2007 18:06 GMT