Citigroup Posts $9.83 Billion Q4 Loss; $17.4 Billion in Subprime Write-downs

After earlier estimates had pegged subprime-led writedowns at Citigroup Inc. as high as $24 million, the actual fourth quarter number posted Tuesday morning by the nation’s largest financial institution was $17.4 billion.

The writedowns led to a miserable fourth quarter, however, as Citigroup reported a $9.83 billion loss for the quarter — it’s biggest quarterly loss in the bank’s history. The fourth quarter loss compares to a $5.1 billion profit in the year-ago period.

Calling the results “unacceptable,” Citigroup CEO Vikram Pandit said in a press statement that write-downs and losses on subprime securities, as well as a large increase in credit costs in spanning its consumer loan portfolio, were primarily to blame.

As a result, Citi said in a separate statement that it would cut its dividend by 41 percent, to $0.32 per share, and issue $14.5 billion in preferred stock. $12.5 billion has already been placed in a private offering to — surprise! — foreign investors from Singapore and Kuwait, among others. (Felix Salmon at Portfolio.com is particularly flummoxoned over the Weill Family Foundation’s participation here).

A look at mortgage operations
From a mortgage banking perspective, the most important aspect of Citi’s report lies in pages 10 & 11 of their investor presentation (click here).

The company reported that 2.56 percent of first mortgages and 1.38 percent of second mortgages were severely delinquent — 90+ days in arrears. First mortgage delinquencies increased 47 basis points during the fourth quarter, while second mortgages saw serious delinquencies increase 39 basis points.

Subprime mortgages and HLTV second liens are by far the biggest driver of credit risk, however — Citi reported that severe delinquencies among subprime mortgages were at 7.83 percent, while second mortgages where LTV was greater than 90 percent were displaying a 90+day past due rate of 2.48 percent.

Citigroup’s portfolio contains subprime loans valued at $9.1 billion, and an additional $21.4 billion in second mortgages where LTV is greater than 90 percent.

Overall consumer credit costs, which include not only real estate lending but other forms of consumer lending, rose $5.41 billion during the fourth quarter, with $4.1 billion of that number in the company’s U.S. operations. Citing increased delinquencies on 1st and 2nd mortgages, unsecured personal loans, credit cards, and auto loans, Citi upped its loan loss provision to to $3.31 billion — up from a $127 million charge in the year-ago period.

For more information, visit http://www.citigroup.com.

Disclosure: At the time this post was published, the author held no positions in C.