DUBAI/NEW YORK (Reuters) - Citigroup Inc C.N shares sank to their lowest level in more than nine years on Tuesday after a prominent Middle East investor said the largest U.S. bank needs to raise more capital and an analyst projected a $15 billion mortgage write-down.
Shares of Citigroup, a Dow Jones industrial average .DJI component, closed down 99 cents, or 4.3 percent, at $22.10, their lowest close since November 1998. The shares fell as much as 8.1 percent earlier in the session.
Speaking at a private equity conference, Sameer al-Ansari, the head of Gulf investment agency Dubai International Capital, said Citigroup may need “a lot more money” from investors, after billions of dollars of write-downs tied to subprime mortgages had depleted the bank’s capital.
New York-based Citigroup in January slashed its dividend 41 percent, and since November has raised some $30 billion of capital from investors including Abu Dhabi, Kuwait, Singapore and Saudi Prince Alwaleed bin Talal.
"It's going to take more than that to rescue Citi," al-Ansari said. Dubai International Capital manages $13 billion of assets, and has invested in such lenders as HSBC Holdings Plc HSBA.L and India's ICICI Bank Ltd ICBK.BO.
Citigroup is comfortable with its capital levels, and isn’t seeking new funds from outside investors, a person briefed on the matter said on Tuesday.
Separately, Merrill Lynch & Co analyst Guy Moszkowski said he now expects a first-quarter loss at Citigroup of $1.66 per share.
The analyst said Citigroup may have write off $15 billion of its $37 billion of exposure to subprime mortgages and collateralized debt obligations.
He said it may also face $3 billion of write-downs for commercial real estate and loans to fund leveraged buyouts, as well as “significant increases” in consumer loan losses. Moszkowski previously expected a profit of 55 cents per share.
Meanwhile, CNBC television said the bank might need to eliminate up to 10 percent of its roughly 375,000-person work force, on top of 4,200 job cuts announced in January.
Citigroup suffered a record $9.83 billion fourth-quarter loss tied mainly to mortgage write-downs.
The bank declined to comment. It said in January that its fund-raising would leave it with capital levels exceeding its targets.
Citigroup shares have fallen 55 percent in the last year. Mounting credit losses led to the November resignation of Charles Prince as Citigroup’s chief executive. Vikram Pandit, who replaced Prince, is reviewing Citigroup’s businesses in a bid to cut costs, and improve profitability and efficiency.
John Dugan, the U.S. comptroller of the currency, in prepared testimony for a Senate Banking Committee hearing said U.S. banks should prepare for an increase in soured loans tied to credit cards, home equity and commercial real estate.
Edward Najarian, another Merrill Lynch analyst, on Tuesday lowered his earnings forecasts for Bank of America Corp BAC.N and Wachovia Corp WB.N, the second- and fourth-largest U.S. banks, citing weakening credit market conditions.
The Abu Dhabi Investment Authority, a sovereign wealth fund owned by the world’s fifth-largest oil exporter, in December bought a 4.9 percent stake in Citigroup. The next month, the Kuwait Investment Authority said it would invest $3 billion.
Alwaleed, who was Citigroup’s largest individual shareholder prior to the Abu Dhabi investment, also increased his stake, as did former Citigroup Chief Executive Sanford “Sandy” Weill.
Additional reporting by John Poirier in Washington, D.C. and Dan Wilchins in New York; Editing by John Wallace, Tim Dobbyn, Richard Chang
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