Vikram Pandit’s learning a hard truth about why so many turned down the job of fixing Citigroup’s hidden black hole – it devours executives who tread inside.
The financial giant yesterday said it expects another “substantial” body blow into the billions with more writedowns of failed assets – on top of $42 billion already lost to bad bets in the past year.
The surprise bad news disclosed at a conference sent shares tumbling more than 4 percent, triggering a big sell-off at other major banks amid investor fatigue at ever-rising asset collapses. Citigroup ended the day at $20.17, down 1.1 percent, or 23 cents.
Much of the momentum for hope that Pandit, who parachuted in as leader six months ago, might score an early rescue all but vanished on the disclosure, proof again that Citi’s troubles run deep.
Chief Finance Officer Gary Crittenden said the bank faces writedowns in the second quarter on not only junk mortgage paper but also in leveraged buyouts and consumer loans.
In the last quarter, the company posted $14 billion in overall writedowns and reserves for various bad assets. Although the upcoming second-quarter losses and writedowns are high, they’ll still be smaller than the prior quarter’s.
Crittenden added the bank also faces another possible setback in its credit value in the second quarter due to more exposure from weakened bond insurers.
In the last quarter, Citi reported a $1.5 billion writedown on assets on which insurers might not be able to pay claims.
In his half-year as chief, Pandit has raised $44 billion in new capital and set up a plan to slash costs and unload assets that would save $400 billion by 2010.
Crittenden said Citi is trying to sell its German consumer lending unit, and that “there’s a lot of interest from different parties.”