UPDATE 1-RESEARCH ALERT-Brokers see higher write-downs at Citi

lunes 5 de noviembre de 2007 16:50 CET

By Nivedita Gupta

BANGALORE Nov 5 (Reuters) - Brokerages warned of further incremental write-downs and losses related to Citigroup Inc's (C.N: Cotización) collateralized debt obligations (CDO) exposure, but expect Chief Executive Charles Prince's departure to lift the stock in the near future.

The world's biggest bank said on Monday that it revised lower its third-quarter earnings per share to reflect the correction on the valuation of its $43 billion CDO exposure. Shares of the company fell almost 6 percent to a new year-low of $35.6.

Goldman Sachs, Banc of America and UBS cut their price target on the stock, after Citi said on Sunday it may suffer an additional $11 billion write-down for subprime losses and an embattled Prince stepped down.

Citi's stock has plunged almost 38 percent from the start of the year, as the company roils in a credit crunch triggered by banks worldwide taking charges on holdings in mortgage-backed securities which have been hit by a meltdown in loans extended to borrowers with patchy credit histories.

Punk Ziegel analyst Richard Bove predicted that the $11 billion write-down might result in Citi posting a loss of 26 cents a share in the fourth quarter.

Bove, who had upgraded Citigroup to "market perform" from "sell" on Saturday, said the second major write-down and reserve addition is likely to calm fears of unknown events causing disarray with the firm's capital.

Bove does not expect Citi to be split up, though he said that such speculation may arise.

Bear Stearns' David Hilder said, "We believe Citi's board still has no desire to preside over a break-up, but it is an option that a new CEO would certainly want to examine."   Continuación...