Citi rating not hurt by SIV consolidation: Moody's

By Neil Shah and Dan Wilchins

NEW YORK (Reuters) - Citigroup Inc's (C.N) plan to consolidate $49 billion of assets tied to troubled structured investment vehicles had no impact on its rating, Moody's Investors Service said on Friday.

However, a breakup of the large U.S. banking conglomerate "would likely have a negative impact," a Moody's analyst said on a conference call.

Moody's has cut its ratings on Citi's debt, saying it doubts the bank can rebuild its capital any time soon. For details, see ID:nN14306408.

"It really is (a) capital issue," a Moody's analyst said, responding to a question about the rating agency's top concern regarding Citigroup.

The analyst said Moody's is "more comfortable" with Citi's Tier 1 capital ratio, a gauge of the bank's ability to absorb losses, but worried about its total capital and leverage ratios.

Citi is wrestling with billions of dollars of assets whose market value has declined in this year's subprime mortgage meltdown and credit squeeze. Its decision to move SIV assets onto its balance sheet further ties up the bank's capital.

The U.S. bank is the largest sponsor of structured investment vehicles, which are off-balance sheet funds that have run into trouble this year.

Citi has said in a statement it is still supporting a U.S. Treasury-endorsed backup fund for SIVs. But a Moody's analyst on the call said the "need is diminished" for the fund.

(Editing by James Dalgleish)