(Recasts, adds details, Bear Stearns comments)
April 21 (Reuters) - Citigroup Inc’s (C.N) lack of earnings power could put the bank under pressure to cut or eliminate its current dividend and raise additional capital, said Oppenheimer & Co analyst Meredith Whitney, as she widened her loss per share forecast on the bank.
Punk Ziegel analyst Richard Bove, who forecast a loss for the bank in 2008, said Citigroup’s first quarter had “little to recommend it from virtually any perspective.”
The largest U.S. bank posted a $5.11 billion quarterly loss on Friday and said it will cut another 9,000 jobs after suffering billions of dollars of write-downs.
Citigroup’s investment bank suffered the brunt of its write-downs, and posted a $5.67 billion quarterly loss, while profit dropped 45 percent to $1.43 billion in consumer banking, the company’s largest business.
Four of the 10 businesses will continue to lose money for the next three quarters as material declines in profitability are expected in all of Citi’s businesses, Whitney said.
She forecast that the company’s U.S. consumer lending business, international consumer finance, market and banking and alternative investments divisions would continue to lose money in 2008.
On Friday, Fitch Ratings cut Citigroup to “AA-minus” from “AA,” while Standard & Poor’s said it might lower its own AA-minus rating. Moody’s assigned a “negative” outlook to its “Aa3” rating, equivalent to AA-minus.
Bear Stearns analyst David Hilder, who cut his 2008 estimates on the stock on Friday to reflect higher expected consumer loan loss provisions, said he expected a steady stream of sales of non-core assets of the company, going forward.
Punk Ziegel’s Bove said it was likely that the loan loss provision will stay at an elevated level for Citigroup for at least another four quarters.
Bove, however, continued to rate Citigroup a “buy,” given its unique franchise, free cash flow position and efforts at a turnaround that could be successful.
“...Large amounts of money + unique franchise will ultimately get improved execution and large profits.” Bove added.
Following are the price target and estimate cuts made by the brokerages on Citigroup: Brokerage Rating Price target 2008 EPS view 2009 EPS view
New Old New Old New Old Oppenheimer Underperform — — -$0.45 -$0.15 $0.90 $2.50 Punk Ziegel Buy $31 $34 -$0.18 $0.50 $2.73 $3.57 Bear Stearns Outperform $32 — $1.00 $1.14 $3.00 $3.22
Shares of Citigroup fell more than 3 percent to $24.26 in morning trade on the New York Stock Exchange. (Reporting by Ramya Dilip in Bangalore; Editing by Amitha Rajan, Jarshad Kakkrakandy)