Standard & Poor's downgrades Citigroup's credit after bank reports $9.83 billion loss
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[January 15, 2008]

Standard & Poor's downgrades Citigroup's credit after bank reports $9.83 billion loss

(Associated Press WorldStream Via Thomson Dialog NewsEdge) NEW YORK_Standard & Poor's Ratings Services slashed its rating on Citigroup Inc.'s credit Tuesday after the bank reported a $9.83 billion (?6.6 billion) loss for the fourth quarter.



The credit-rating agency downgraded Citi's credit to "AA-" from "AA," reflecting "severe" losses in the bank's fixed-income division. S&P is still considering downgrading Citi's credit further.

The downgrade "takes into consideration that Citigroup's performance could be rocky in 2008 amid prospects for a continued difficult operating environment for U.S. banks," S&P said.



Citigroup wrote $18.1 billion (?12.16 billion) off its portfolio of mortgage debt as demand for investments backed by home loans has vanished. S&P cannot rule out further write-downs in this portfolio, the agency said.

The bank also set aside $3.31 billion (?2.22 billion) to prepare for more missed payments on consumer debt such as credit card and car loans. S&P analyst Tanya Azarchs said this deterioration in credit quality may spill from consumer debt into loans to corporations, forcing Citigroup to save more cash to cover the losses.

S&P's new rating denotes "high quality," whereas the previous rating implied "maximum safety." The bank's capital cushion, bolstered today when Citigroup cut its dividend and announced $12.5 billion (?8.4 billion) in investments from a litany of investors, is still not an issue, S&P said.

"Although Citigroup will likely face a tough environment over the next year or two, its fundamental earnings power is not impaired," S&P said.

Copyright ? 2008 The Associated Press. All rights reserved. This material may not be published, broadcast, rewritten or redistributed.

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