Citi Nets Loss Of $6.7 Billion Due to Mortgages

Citigroup Inc. in its second quarter took $6.67 billion in writedowns that were largely mortgage-related and a net loss of $2.5 billion that it said marked a relative improvement given that it was half the size of the first quarter's.

The company said $3.4 billion of its writedowns stemmed from subprime-related direct exposures, $2.4 billion were related to exposure to monoline insurers, $545 million were on commercial real estate positions and $325 million were on alternative-A credit mortgages, net of hedges.

"The cost of credit increased by 20% from the first quarter, but writedowns in our securities and banking business dropped by 42%," said Vikram Pandit, Citi's chief executive officer. "Additionally, headcount and expenses declined sequentially," he said. "While there is still much to do, we are encouraged by our progress in delivering on our commitment to the re-engineering efforts." Standard & Poor's called the company's loss "within expectations."

"Charges for mortgage and leveraged loan-related assets ... have to be much smaller in the future, as super-senior collateralized debt obligations (unhedged) are already written down 80%," S&P said in a report. "Even monoline exposures are about 60% reserved against, although these and the alt-A exposures are the most likely sources of further write-offs," the ratings agency said. "The bigger issue is the pace of consumer credit deterioration, which will require accelerating provisioning during the next several quarters." (c) 2008 Mortgage Servicing News and SourceMedia, Inc. All Rights Reserved. http://www.mortgageservicingnews.com/ http://www.sourcemedia.com/

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