Risk Management

Citi of Write-downs

Bank CFO Crittenden says that the Q2 amounts related to sub-prime mortgages and LBO loans will be less than the $6 billion Q1 write-downs.
Stephen TaubJune 19, 2008

Citigroup Inc. CFO Gary Crittenden warned investors that the banking giant could take substantial write-downs in the second quarter related to sub-prime mortgages, leveraged buyout loans, and other assets — although they won’t exceed the $6 billion that Citi recorded in the first period.

While the finance chief assured investors on a conference call hosted by Deutsche Bank AG that the amount would be smaller, Bloomberg News reported that he still warned: “We will continue to have substantial additional marks on our subprime exposure this quarter. We may continue to see the magnitude of the marks decline, as the exposures that we have declined.”

The wire service noted that Citi has already taken more than $40 billion of credit losses and write-downs since the subprime mortgage market collapsed last year. Its subprime holdings include collateralized debt obligations, which are securities packaged from pools of loans and bonds.

Crittenden also said the bank may need to write down the value of assets backed by so-called monoline insurance companies such as Ambac Financial Group Inc., after they lost their AAA credit ratings.

Citi’s stock dropped 4 percent on the report, and helped to drag down the shares of many other major banks.

Earlier this week, Goldman Sachs warned that American banks may need to raise another $65 billion of capital to deal with their losses from the credit crisis.