Citigroup sub-prime losses soar to $11 billion

by Gill Montia

Story link: Citigroup sub-prime losses soar to $11 billion

Citigroup, the world’s largest financial institution, has reported that third-quarter profit will fall a further $166 million, as a result of the bank’s losses in the US sub-prime mortgage crisis.

The group has already reported a 57% drop in profit for the third-quarter of 2007 and the announcement came after a revaluing of its portfolio of sub-prime investments.

The bank had estimated that it would write-off around $6 billion as a result of the crisis but yesterday it emerged that the amount will be almost $17 billion.

The fact that the figure is more than double the previous highest estimate has sent shockwaves across the global banking industry, with investors nervous of further large losses from financial services groups.

Shares in Merrill Lynch, Morgan Stanley and Goldman Sachs all dropped as a result of the news.

The Chancellor of the Exchequer, Alistair Darling, is urging the UK banking sector to keep a sense of perspective.

Speaking on “Today”, the BBC Radio 4 programme, he stated that: ” the British economy is strong….there are grounds for believing that we will get through this. We have a strong economy; its momentum will carry us through.”

However, there are rumours of impending difficulties in the UK banking industry and it is reported that Barclays has been telling analysts to reduce profit forecasts.