CITIGROUP Inc posted the biggest loss in the US bank's 196-year history as surging defaults on home loans forced it to write down the value of subprime-mortgage investments by US$18 billion.
The fourth-quarter net loss of US$9.83 billion, or US$1.99 a share, compared with a profit of US$5.1 billion, or US$1.03, a year earlier, the biggest US bank said yesterday in a statement. Citigroup also cut its dividend by 41 percent and said it will receive US$14.5 billion from outside investors to shore up depleted capital.
"We are taking comprehensive action to position Citi for the future with the capital strength that will allow us to refocus on earnings and earnings growth," said Chief Executive Officer Vikram Pandit, who was installed in December after Charles Prince stepped down amid mounting subprime losses.
Citigroup racked up record losses as it misjudged the depth of the mortgage crisis. The writedown for subprime home loans and related securities was almost double the amount the company expected as recently as November. Citigroup's markdown is the biggest so far, exceeding the US$14 billion reported by Zurich-based UBS AG, Europe's biggest bank.
"Things are still bad out there for financials, and there's more bad news to come," said Jon Fisher, who helps oversee US$22 billion at Minneapolis-based Fifth Third Asset Management. "The balance sheet is a mess, they've got to raise capital, and the charges keep going up every day."
The net loss exceeded analysts' estimates of 97 cents a share, according to a survey by Bloomberg News. Citigroup has slumped 47 percent in New York Stock Exchange composite trading during the past year. Bank of America Corp, which may report an 80-percent drop in fourth-quarter net income next week, fell 27 percent, and JPMorgan Chase & Co, which may post a 31-percent decline in earnings today, lost 14 percent of market value.
Citigroup, founded in 1812 as the City Bank of New York, cut the quarterly dividend to 32 cents a share from 54 cents. The reduction, the first since the merger of Citicorp and Travelers Group Inc in 1998, will help save the company about US$4.4 billion on an annual basis. The company said as recently as November that it had no plans to lower the payout to shareholders.
The fourth quarter may be the worst earnings period for the financial industry since the Great Depression. Other major banks and finance houses are still to complete reports.