Citigroup falls on "sell" after $15 bln writeoff seen

By Jonathan Stempel

NEW YORK (Reuters) - Citigroup Inc shares suffered a fresh beating on Monday after Goldman Sachs & Co downgraded the stock to "sell" from "neutral," and said the largest U.S. bank may have to write off $15 billion over the next two quarters as mortgage losses reduce earnings.

Shares of Citigroup fell as much as 5.9 percent, leading a broad decline in financial services stocks. They had slid 29 percent in the previous five weeks.

Monday's report from analyst William Tanona came shortly after Citigroup's own chief U.S. equity strategist, Tobias Levkovich, upgraded the nation's banking sector to "overweight" from "market weight," calling selling pressure "overdone."

Goldman's forecast compares with the $8 billion to $11 billion that Citigroup on November 4 said it may write off this quarter for exposure to subprime mortgages and collateralized debt obligations. Charles Prince, Citigroup's chief executive, resigned the same day.

"With deteriorating consumer and housing metrics, Citigroup is facing mounting pressure across many businesses," Tanona wrote. "The lack of leadership at this point in Citigroup's storied history could not have come at a worse time."

Tanona projected write-downs of $11 billion this quarter and $4 billion in the first quarter of 2008. A $15 billion loss would, after taxes, wipe out close to six months of profit.

"(Citigroup's) risk-taking culture may be irreparably damaged," Tanona wrote.

Tanona said the bank may need to cut its 54-cents-per-share quarterly dividend or find new capital to shore up capital levels. He also cut Citigroup's price target to $33, and his profit-per-share forecast to $3.80 from $4.65 for 2008, and to $4.60 from $5.20 in 2009.