Citigroup sells $6 bln in preferred shares

NEW YORK (Reuters) - Citigroup (C.N: Quote, Profile, Research) on Monday sold $6 billion in preferred shares to shore up its balance sheet after the largest U.S. bank recorded over $16 billion in write-downs and credit losses in the first quarter.

Citi plans for the shares to pay a dividend of 8.4 percent for 10 years and a floating rate after that, according to International Financing Review, a Thomson Reuters company.

This deal will bring Citi's total of capital raised since November to more than $36 billion to help offset more than $45 billion of losses and write-downs as a slowing economy hurts its customers' ability to pay back everything from corporate loans to subprime mortgages.

Banks this year have been increasing their issuance of preferred shares, which improve their "Tier 1" capital ratios, a measure of the ability to cover losses.

"Banks are moving to shore up their balance sheets after the losses that they've had and possibly in anticipation of further losses," said Standard & Poor's credit analyst Tanya Azarchs.

Citi's deal follows a similar $6 billion sale of perpetual preferred shares last week from JPMorgan Chase & Co (JPM.N: Quote, Profile, Research). Banks globally have raised more than $200 billion of capital to offset massive credit losses amid a global credit squeeze.

Responding to the loss, S&P on Friday put Citigroup's counterparty rating on review for a downgrade, saying problems with its loan portfolio are likely to depress earnings in the medium term.

The bank will have to sustain "high levels of quality capital," improve its earnings and maintain loan quality on par with other highly rated banks to preserve its rating, S&P said.

Citigroup's counterparty rating is now "AA-minus," the fourth-highest investment grade.