(Adds analyst comments, background)
Jan 2 (Reuters) - Punk Ziegel analyst Richard Bove said he yet again lowered his 2007 and 2008 earnings view for Citigroup Inc (C.N) to reflect the possibility that the No. 1 U.S. bank’s new management may seek as deep a write-off as possible to clear the outlook for 2008.
Bove, who has a “buy” rating and a price target of $37 on the stock, noted that Citigroup’s board has to now decide if it will further harm shareholders by cutting its dividend.
He, however, said that the bank can easily pay its dividend from its free cash flows.
“Citigroup generates $5 billion in free cash per quarter and its dividend is about 52 percent to 55 percent of that amount,” Bove wrote in a note to clients.
Last month, a Goldman Sachs analyst said that Citigroup may need to slash its dividend by 40 percent to preserve capital, while projecting a fourth-quarter write off of $18.7 billion from Citigroup’s collateralized debt obligations.
Citigroup had earlier projected an $8 billion to $11 billion fourth-quarter write-down, and raised its capital by selling a $7.5 billion stake to Abu Dhabi’s government. This move was seen as a signal to investors and analysts that Citi was likely to have a rough fourth quarter.
Punk Ziegel’s Bove cut his 2007 earnings estimate for Citigroup to $1.90 per share from his prior view of $2.35 per share, and slightly lowered his 2008 earnings view by 1 cent to $3.74 per share.
Shares of the company closed at $29.44 Monday on the New York Stock Exchange. (Reporting by Tenzin Pema in Bangalore; Editing by Bernard Orr)