Citigroup has huge loss, cuts dividend, raises cash

By Jonathan Stempel and Dan Wilchins

NEW YORK (Reuters) - Citigroup Inc said on Tuesday it plans to raise $14.5 billion, slash its dividend and cut 4,200 jobs to shore up its balance sheet after a write-down for mortgages led to a record $9.83 billion quarterly loss.

The capital infusion includes $12.5 billion from investors including Singapore's and Kuwait's governments, former Citigroup Chief Executive Sanford "Sandy" Weill and Saudi Prince Alwaleed bin Talal, the bank's largest individual shareholder.

Adding the much-needed cash may help the largest U.S. bank and new Chief Executive Vikram Pandit survive through the credit market and housing crises. Citigroup announced an $18.1 billion write-down and cut its dividend 41 percent.

"You expected the figures to be shocking," said Simon Maughan, an analyst at MF Global in London. "You cannot say it's definitively over, but you have got to say, 'This is probably the big one.'"

But some analysts had hoped for even larger amounts, and said Citigroup faces a tough road ahead. The bank's shares tumbled $2.18, or 7.5 percent, to $26.88 in afternoon trading on the New York Stock Exchange.

"Citigroup's capital raise coupled with aggressive markdowns by some peers makes us wonder if management couldn't have used more aggressive assumptions to write down this portfolio," Sandler O'Neill & Partners LP analyst Jeff Harte wrote. He rates the bank "hold."

The fourth-quarter loss totaled $1.99 per share, roughly twice as big as analysts expected. It stemmed largely from subprime mortgages, plus a $5.41 billion jump in credit costs, including a $3.85 billion charge to add reserves.

Quarterly revenue fell 70 percent to $7.22 billion. Full-year profit sank 83 percent to $3.62 billion. Standard & Poor's cut the bank's credit rating, and with Fitch Ratings said it has a "negative outlook."

Citigroup, based in New York, cut its quarterly dividend to 32 cents per share from 54 cents, a move that could save it about $4.4 billion a year.

The job cuts, equal to just over 1 percent of Citigroup's work force, reduced earnings by $337 million. They are in addition to 17,000 cuts announced last April.

ALWALEED, WEILL

Citigroup said it is raising $12.5 billion from a private sale of convertible preferred securities.

It said this includes $6.88 billion from Singapore Investment Corp Pte, and investments from the Kuwait Investment Authority, Weill and his family foundation, Alwaleed, the money manager Capital Research & Management, and the state of New Jersey. Kuwait said its investment totaled $3 billion.

Citigroup also plans to sell $2 billion more convertible preferred securities, and other preferred securities. In November, the bank got a $7.5 billion infusion from Abu Dhabi's government, in exchange for a 4.9 percent stake.

"The investment from Sandy Weill is a huge vote of confidence," said William Smith, chief executive of Smith Asset Management in New York. "I'm surprised to see his name."