The biggest U.S. bank was lowered to "sell'' by a Goldman Sachs Group Inc analyst who said Citi's write-downs of collateralized debt obligations may total $15 billion over the the next two quarters.
William F. Tanona projected write-downs of $11 billion this quarter and predicted that bank could write down as much as $15 billion related to mortgage losses, estimating that the bank would need to take a further $4 billion in the first quarter of 2008.
A $15 billion loss would, after taxes, wipe out close to six months of profit.
Goldman's forecast compares with the $8 billion to $11 billion that Citigroup on November 4 said it may write off this quarter for exposure to subprime mortgages and collateralized debt obligations.
Downgrading estimates
New York-based Citigroup said earlier this month that further write-offs would likely act as a drag on its fourth-quarter earnings.
Tanona lowered his estimate of Citigroup's earnings per share next year to $3.80 from $4.65 and his price estimate to $33. On November 8 Tanona had a twelve-month target of $40, while on November 5 it was $48.
Goldman's rating cut came after Deutsche Bank downgraded Citigroup to "sell" October 12. CIBC Capital Markets and Morgan Stanley also have the equivalent of "sell" ratings on the stock.
Leadership
Mr. Tanona said that Citigroup should aim to appoint quickly a replacement for Charles Prince, who resigned as chairman and chief executive this month in the wake of an $8.4 billion third-quarter write-off and the forecast of another one of up to $11 billion this quarter.
"The lack of leadership at this point in Citi's storied history could not have come at a worse time," Tanona wrote in a report. "With deteriorating consumer and housing metrics, Citigroup is facing mounting pressure across many businesses."
Citigroup's shares were down 5.0 percent at 32.30 dollars in early afternoon deals. The stock is at its lowest level in more than four years and is down 43 percent year to date.
November 20, 2007