Citigroup shares fall to 10-year low on news of possible $8.9 billion write-downs

26 June 2008

Goldman Sachs is considered the resident Wall Street expert, so when an analyst from this firm speaks, world financial markets listen with attention. Unfortunately, for Citigroup, the views aren't very encouraging. As a result, shares of the largest American bank fell to their lowest level in nearly a decade after the aforementioned analyst, William Tanona, recommended that investors should sell Citi stock short as losses mount from troubled debt.

In morning trading, the shares were down $1.03 (51 pence), or 5.5 per cent, at $17.82 (9 pounds) on the New York Stock Exchange. The shares were among the biggest drags on the Dow Jones industrial average .DJI and Standard & Poor's 500 .SPX, which both fell more than 1 per cent.

They also touched their lowest level since October 1998, the month that Sanford "Sandy" Weill merged his Travelers Group with Citicorp to create Citigroup.

Tanona, who added Citigroup to the Americas conviction sell list, expects the bank to post a loss of 75 cents a share for the quarter, compared with his prior forecast of a loss of 25 cents.

He said Citigroup might take $8.9 billion of write-downs for the April-to-June period, leading to its third straight quarterly loss. He also said the bank might need to cut its quarterly dividend for a second time this year, after lowering it 41 per cent to 32 cents per share in January.

Tanona is not alone in such dire predictions for the century-old New York institution. Only two days ago, Merrill Lynch analyst Guy Moszkowski projected $8 billion of write-downs for Citigroup.