Citigroup and Merrill Lynch announce yet more net losses

LOSSES & LAWSUITS

Citigroup announced a fourth-quarter net loss of $9.8 billion, following a $17.4 billion writedown on subprime-related direct exposures in fixed-income markets, and a $4.1 billion increase in credit costs in US consumer-lending business.

Citigroup is cutting 4,200 more jobs, after 17,000 cuts last year, and is seeking further cost-cutting measures. It has slashed its dividend by 41% and said it had found $12.5 billion in capital from private investors. The bank is also selling $2 billion of convertible preferred shares to the public as part of a total $14.5 billion capital-raising plan. The Singapore government's sovereign investment fund is providing $6.8 billion of the private placement. Two months ago, the bank received $7.5 billion by selling a stake to Abu Dhabi's sovereign fund.

Merrill Lynch has reported a $7.8 billion net loss for the full year 2007 after it wrote off or adjusted $16 billion in subprime infected assets.

Analysts predicted Merrill had a subprime exposure of between $10 billion and $15 billion, but so far the bank has been forced to write off $23 billion in subprime related assets to keep up with subprime prices in freefall. The bank's new chief executive, John Thain, is reportedly keen to spike the ailing bank's subprime fever as soon as possible, and restore investor confidence that the slate has been wiped clean.