Shares of Citigroup fell 5.9 percent to US$32 yesterday, the lowest in four years, after Goldman Sachs Group Inc downgraded the stock to "sell" from "neutral" on Monday, predicting the bank could write off up to US$15 billion in soured investments, including mortgage losses, in coming months.
The US' second-largest bank by market worth, Citigroup is already reeling from its exposure to the US housing downturn and tighter credit markets.
The banking behemoth is searching for a new chief executive officer after former CEO Charles Prince stepped down on Nov. 5 as Citigroup revealed it was facing likely investment writeoffs of between US$8 billion and US$11 billion.
Analysts at Goldman Sachs believed the company could be forced to absorb bigger writeoffs.
"We currently assume Citigroup will take an US$11 billion writeoff in the fourth quarter of 2007, at the high end of the firm's guidance, and we also assume an additional US$4 billion writeoff in the first quarter of 2008," the Goldman analysts said in a report.
They said the bank "will likely face an increasingly challenging operating environment which is likely to pressure results in many of their businesses."
Citigroup made US$2.4 billion in net profit during the third quarter, but its profits slowed dramatically amid pre-tax losses of US$1.56 billion and other losses and writedowns totaling almost US$2 billion.
New York-based Citigroup said earlier this month that further writeoffs would likely act as a drag on its fourth-quarter earnings.
The Goldman analysts have trimmed their earnings forecast for Citigroup next year to US$3.80 per share compared with a prior assumption of US$4.65.
The Goldman analysts said they "do not expect a `quick fix' to some of Citi's issues," adding that "the lack of leadership at this point in Citi's storied history could not have come at a worse time."
Deutsche Bank AG on Monday also cut its price target for Citigroup by 15 percent to US$29. Deutsche Bank has a "sell" recommendation on the shares.
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