NEW YORK (Reuters) – Citigroup Inc on Tuesday said it is raising at least $14.5 billion and cutting its quarterly dividend 41 percent to help shore up a capital base depleted by losses on subprime mortgages and consumer credit.
The bank also posted its first quarterly loss since its creation in 1998, hurt by $18.1 billion of write-downs for exposure to subprime debt. It also said U.S. credit losses increased $4.1 billion, largely because more consumers are falling behind on payments.
The net loss for the largest U.S. bank totaled $9.83 billion, or $1.99 per share, roughly twice as large as analysts expected.
Citigroup said it is raising $12.5 billion from a private sale of convertible preferred securities.
It said this includes $6.88 billion from a fund affiliated with Singapore’s government. The bank also said it includes investments from the Kuwait Investment Authority, Saudi Prince Alwaleed bin Talal, the asset management firm Capital Research & Management, the state of New Jersey, and former Citigroup Chief Executive Sanford “Sandy” Weill.
Citigroup also plans to sell $2 billion of convertible preferred securities to other investors, and sell additional preferred securities.
“We are taking comprehensive action to position Citi for the future with the capital strength that will allow us to refocus on earnings and earnings growth,” Vikram Pandit, who became chief executive in December, said in a statement.
Citigroup said that if it completes the private offering and its planned purchase of Japanese brokerage Nikko Cordial Corp, its Tier-1 capital ratio would be about 8.2 percent, above its target. The capital ratio measures the bank’s ability to cover losses.
“What Pandit’s doing here is setting the table for 2008,” said William Smith, chief executive of Smith Asset Management in New York. “The investment from Sandy Weill is a huge vote of confidence on his part. I’m surprised to see his name there.”
Citigroup reduced its quarterly dividend to 32 cents per share from 54 cents, which could save more than $4 billion a year.
Citigroup shares closed Monday at $29.06 on the New York Stock Exchange. The shares have fallen 47 percent in the last year, compared with a 28 percent drop in the Philadelphia KBW Bank Index.