Citigroup stocks took a bath in the wake of its warning that losses in its consumer loan portfolio could rise between $US1 billion and $US2 billion each quarter from now through the first half of next year, according to chief executive Vikram Pandit's speech notes released on the banking giant's website.The notes reveal "buried" details about company's expectation that consumer credit losses will be substantially higher, said Bernstein Research analyst John McDonald, who alerted his clients to the disclosure.
Citi's consumer credit losses in its third quarter were $US4.6 billion ($7.1 billion), meaning the guidance in the speech notes suggests the bank's quarterly losses on the portfolio could reach $US10.6 billion by the second quarter of next year.
Shares of Citigroup, which plans to slash 50,000 jobs worldwide, had declined 9.5 per cent to $US8.05 with just under an hour of trading remaining on Wall Street.
A Citi spokeswoman declined to comment on Mr McDonald's report, and referred other questions to the 13 pages of speech notes released on the company's website.
Mr McDonald cut his price target on Citi shares to $US11 from $US20 based on the higher credit losses outlined in the speech notes. He also widened his fourth-quarter loss expectation to US61c a share from US41c and cut his 2009 earnings forecast to US22c a share from US63c.
Citigroup also revealed in Mr Pandit's notes its plans to change its accounting for a large portion of its risky, written-down assets. It will move about $US80 billion of the assets from its trading portfolio to either its held for investment, held to maturity or available for sale categories on its balance sheet.
Mr Pandit said $US80 billion in assets had been marked down appropriately and that the realised losses on the loans would be greater than the level they'd been marked down to already, according to the notes.
He said the purpose of the accounting change "reduces the earnings volatility that these assets could pose," and that it allows Citi to benefit from a return on equity from any upside to the assets.
Bernstein's Mr McDonald said the $US80 billion comprised most of Citi's $US88 billion in risky collatoralised debt obligations, leveraged loans, mortgage securities and auction rate securities.
Once the assets are moved out of Citi's trading portfolio, any future write-downs would no longer follow through Citi's income statement unless it sells them, or recognises an "other than temporary impairment charge" against them, he said.
However, Mr McDonald estimated that Citi would still have to write-down $US3.5 billion on the assets in its fourth quarter when it makes the accounting change.
Mr Pandit delivered a speech based on the notes and a slideshow, which was released on the company's website.
Mr Pandit told those at the employee-only meeting on Monday that the company's capital position was strong and it was moving ahead with restructuring plans, which include an additional 50,000 job cuts.
Citi reported last month a $US2.8 billion net loss in its third quarter; its losses over the last four quarters totalled more than $US20 billion.
