Citi Takes $17.4B Subprime Writedown

Citigroup has reported a $9.8 billion loss for the fourth quarter after taking a $17.4 billion writedown on subprime mortgage assets and reducing its subprime exposure from $54.6 billion in the third quarter to $37.3 billion. Citigroup executives cited the writedowns and losses on U.S. mortgage and consumer loans as the primary reason for the poor performance. They also say they expect continued deterioration in mortgage and consumer loan performance this year and have valued their remaining subprime assets (including $29.3 billion in collateralized debt obligations) based on the assumption that house prices will decline 6.5% -7.0% in 2008 and 2009. The giant international banking company also announced plans to raise more capital (see item below), and it is reducing its dividend by 40% to 32 cents. In response to the earnings report, Fitch Ratings announced that its rating outlook for Citigroup will remain negative "until profitability is restored, exposure to topical areas is further reduced, and asset quality stabilizes." The company can be found online at http://www.citi.com.