Citigroup loses almost $10B, writes off $18B, receives $12.5B, slashes dividend and cuts 21,200 jobs

Citigroup lost almost $10 billion in last year's final three months, the largest quarterly deficit in its 196-year history, and slashed its dividend and 4,200 jobs as it recorded a mammoth write-down for bad bets on the mortgage industry. The reduction of 4,200 jobs in the fourth quarter is in addition to 17,000 layoffs announced in the spring, and chief financial officer Gary Crittenden said that more job cuts would be on the way.

The nation's largest bank wrote down the value of its portfolio by $18.1 billion. It also boosted loan-loss reserves by $4.1 billion, signaling further problems in its consumer businesses as deflated home prices, high energy and food costs, and rising unemployment weigh on people's ability to make their loan payments.

To bolster its capital, the bank also said Tuesday [15 Jan 2008] it has lined up $12.5 billion in new investments from sovereign wealth funds and existing shareholders. That includes $6.88 billion from the Government of Singapore Investment Corp. (GIC) for a 4% stake. The $12.5 billion in fresh equity adds to the $7.5 billion that Citi got in November from the Abu Dhabi Investment Authority in exchange for a 4.9% stake in the company.

Citigroup cut 41% cut its quarterly dividend to 32 cents a share from 54 cents. Citigroup's decision to cut its dividend and seek new cash from outside investors was widely anticipated on Wall Street after months of scrutiny over the bank's deteriorating operations. The biggest was Citigroup's bad bets on mortgage-backed bond instruments called collateralized debt obligations. It also was forced to bring $49 billion in hemorrhaging funds known as structured investment vehicles onto its books.

channelnewsasia.com :

GIC will pump in US$6.88 billion (S$9.8 billion) into one of the world's largest banks. This is part of Citigroup's bid to raise US$12.5 billion of capital to boost its financial position. GIC is the hand behind the management and enhancement of Singapore's reserves. GIC's investment is done through a financial instrument called convertible preferred securities. This will effectively give GIC some form of protection. For example, if Citigroup's stock price falls, GIC does not have to convert its securities into shares and will continue to earn dividends of 7%.

GIC now holds 0.3% of shares in Citigroup. The new deal will bring GIC's stake in the bank to 4% if converted to shares. The investment will make GIC, as a single entity, one of the top five investors in Citigroup. However, GIC says it will not sit on Citigroup's board. GIC's latest investment comes hot on the heels of a major deal last month, when it pumped nearly S$14 billion into the Swiss banking giant UBS.

- That's a lot of things to put into one title. But it's the big story of the day. And it's a sea of red out there : at the point of writing, the Dow is down 202 points, Nasdaq is down 50, S&P 500 is down 28, and the TSX is down 237 points.

As I am writing this, Citigroup's shares are at $27.26, and the dividend cut means that the yield at this price has dropped from 7.9% down to 4.7%. Which means that the Arabs, with their special 11% yield, got a good deal. The Singaporeans are behind quite a bit, with a 7% yield.

In other news, the total "body count" has increased and it now stands at 21,200 jobs lost, up from earlier reports of 15,000, then 17,000 and then over 20,000.

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