Goldman Sachs & Co has downgraded Citigroup to 'sell' from 'neutral,' and said the largest US bank may have to write off $15 billion over the next two quarters as mortgage losses reduce earnings.
The report from analyst William Tanona came shortly after Citigroup's own chief US equity strategist, Tobias Levkovich, upgraded the nation's banking sector to 'overweight' from 'market weight,' calling selling pressure 'overdone.'
Goldman's forecast compares with the $8 billion to $11 billion that Citigroup on November 4 said it may write off this quarter for exposure to sub-prime mortgages and collateralized debt obligations. Charles Prince, Citigroup's chief executive, resigned the same day.
'With deteriorating consumer and housing metrics, Citigroup is facing mounting pressure across many businesses,' Tanona wrote. 'The lack of leadership at this point in Citigroup's storied history could not have come at a worse time.'
The analyst also lowered his price targets for six other banks and brokerages: Bear Stearns Cos, E*Trade Financial Corp , JPMorgan Chase & Co, Lehman Brothers Holdings Inc, Merrill Lynch & Co and Morgan Stanley.
Banks have announced more than $50 billion of write-downs tied to the U.S. housing slump, as defaults soared and the value of mortgages that investors deemed too risky plummeted.
