Citigroup downgraded after monumental losses

Citigroup saw its credit ratings docked today after announcing fourth-quarter losses of $9.83 billion, driven by subprime writedowns totalling $17.4 billion.

Rating agency Standard & Poor's cut the bank's long-term credit rating to AA- from AA, "reflecting the group's severe losses ... stemming from a single business line". The writedowns leave Citigroup with $8 billion of lending and structuring exposure and $29.3 billion of exposure through super-senior tranches of collateralised debt obligations based on subprime asset-backed securities.

The bank also announced its costs are increasing due to the slowdown in the US economy - credit costs rose $4.1 billion in the quarter, due to rising delinquencies on mortgages, credit cards and other loans.

The bank also announced $12.5 billion in new investment, led by $6.88 billion from the Singapore Investment Corporation, with contributions from other private investors and sovereign wealth funds. This should allow the bank to maintain a tier-one capital ratio of 8.2%, Citigroup said.

But S&P warned that the worst might not be over for the bank. New York-based analyst Tanya Azarchs wrote: "Our downgrade also takes into consideration that Citigroup's performance could be rocky in 2008 amid prospects for a continued difficult operating environment for US banks. More writedowns of mortgage-related securities cannot be ruled out".

See also: Citi names Vikram Pandit as CEO
Citigroup names new chief risk officer
S&P: Two years of problems ahead
Change at top as Citi sees writedowns