US banking giant Citigroup's problems deepened today as it was unable to assure investors that a potential $11 billion write-down for sub-prime mortgages would not increase.
The bank also reduced previously reported third-quarter profit because of credit market problems that it said could reduce future cash flow.
Citigroup is also struggling with a void in permanent leadership, following Sunday's resignation of chairman and chief executive Charles Prince. Robert Rubin, former US treasury secretary and chairman of Citigroup's executive committee, was named chairman.
The announcement of an expected $8 billion to $11 billion write-down, equal to $5 billion to $7 billion after taxes, caused Citigroup shares to fall as much as 5.6% on Wall Street.
Much of Citigroup's trouble relates to $43 billion of so-called collateralised debt obligations linked to lower-quality mortgages. While these 'super-senior' securities were once considered rock-solid, investors have stopped buying them, the bank said.
'There's no way I think anyone can give you an assurance of how things are going to move,' chief financial officer Gary Crittenden said on a conference call.
Meanwhile, Fitch Ratings cut Citigroup's credit rating to 'AA', its third-highest grade, from 'AA-plus', citing 'severe pressure' on capital markets operations and 'an inhospitable consumer credit environment'.
Citigroup also lowered third-quarter profit to $2.21 billion, or 44 cents per share, from the reported $2.38 billion, or 47 cents. The reduction means profit fell 58% from a year earlier, and brought the total quarterly write-down to nearly $6.8 billion.
