Citigroup Inc., already the bank with the most losses from the collapse of the mortgage market, predicted “substantial” additional writedowns Thursday.
Writedowns in the second quarter won't be as large as the $6 billion recorded for the first quarter, Chief Financial Officer Gary Crittenden said on a conference call with investors. Since last year the company has booked more than $42 billion of losses and writedowns because of the credit market contraction, or about 10 percent of the $396 billion racked up by banks worldwide.
“We will continue to have substantial additional marks on our subprime exposure this quarter,” Crittenden said on the call, which was sponsored by Deutsche Bank AG. “We may continue to see the magnitude of the marks decline, as the exposures that we have have declined.”
Vikram Pandit, who took over as chief executive officer in December, has raised $44 billion in capital and outlined plans for the company to reduce assets by $400 billion over the next two to three years.
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“It is obviously another setback,” said Marshall Front, who oversees $700 million as chief executive officer of Front Barnett Associates in Chicago, including Citigroup shares. “The subprime issue is lasting longer than some had thought and may extend into 2009. It's difficult to know when we are going to see that begin to stabilize.”
Citigroup, based in New York, fell 23 cents to $20.17 in composite trading on the New York Stock Exchange. Its market value has dropped by almost a third this year.
Citigroup may also have to write down the value of assets backed by so-called monoline insurance companies such as Ambac Financial Group Inc., which were stripped of their AAA credit ratings, the 54-year-old CFO said. Last quarter it recorded a cost of $1.5 billion to account for the reduced likelihood that insurers will be able to pay, and the company may have a “similar” cost in the second quarter, Crittenden said.
Total credit costs, including loan write-offs and reserves for future losses, may exceed those reported for the first quarter, Crittenden said. The company had $5.6 billion of such costs in the first quarter, after a record $7.3 billion in the fourth quarter of last year, according to the firm's financial statements.