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Citigroup announces $10bn loss
Largest US bank to lose 4,200 staff in latest repercussions from bad mortgage debts.
Last Modified: 16 Jan 2008 19:42 GMT
Vikram Pandit, Citigroup's chief executive, said the losses were 'clearly unacceptable' [EPA]
The largest bank in the US has announced record net losses of almost $10bn, mainly stemming from its involvement in the high-interest, or "sub-prime," mortgage crisis that has shaken financial institutions around the world.
 
Citigroup said that 4,200 staff would lose their jobs after the bank lost more than $18bn in mortgage-related loans.
Vikram Pandit, Citigroup's chief executive, said the company's losses, which were for the last three months of 2007, were "clearly unacceptable".
 
Sub-prime home loans were issued to people from the US on low incomes in a housing boom that has since declined, leaving many unable to repay them.

Fresh investments

On Tuesday, Citibank said it had raised $14.5bn in fresh investments in an attempt to cover the losses, including from the investment arms of the governments of Kuwait and Singapore.

Prince Alwaleed bin Talal bin Abdulaziz of Saudi Arabia and Sanford Weill, former Citigroup chief executive, are among others who have invested in the bank.

Pandit described the investments as "a vote of confidence". 

But he said: "There is no doubt that we're in the midst of a very challenging environment."

Despite the pledges of fresh support, investors punished Citigroup's share price.

The bank's shares fell 6.1 per cent to $27.27 in trading on Tuesday.

The New York-based banking group has also cut its quarterly share payment dividend to 32 cents per share from 54 cents, a move that could save it about $4.4bn a year.

Congress inquiry

The reduction of 4,200 jobs, a quarter of Citigroup's workforce, is in addition to 17,000 announced in the spring, and Gary Crittenden, Citigroup's chief financial officer, said that more job cuts would be on the way.

Most analysts had expected the losses and some said the worst could now be over for Citigroup.

Simon Maughan, an analyst at MF Global in London, said: "You expected the figures to be shocking. You cannot say it's definitively over but you have got to say this is probably the big one."

Analysts believe the US Congress may soon convene hearings into the deals because of the involvement of foreign governments.

Rival banks are also reeling from the housing meltdown.

Merrill Lynch also said on Tuesday that it had raised $6.6bn in fresh capital from foreign and US investors including the Kuwait Investment Authority and the Korean Investment Corporation.

Dozens of international financial institutions have been caught up in the sub-prime crisis that has led to thousands of home repossessions.

Source:
Agencies
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