Citigroup Chief Pandit Says Credit Crisis More Than Half Over

Citigroup Chief Pandit Says Credit Crisis More Than Half Over

April 22 (Bloomberg) -- Citigroup Inc. Chief Executive Officer Vikram Pandit, facing shareholders for the first time since his appointment in December, said the credit-market contraction that saddled his bank with record losses is abating.

``We are closer to the end'' than to the beginning of the crisis, Pandit said today at the company's annual shareholder meeting, held in a ballroom of the Hilton New York in Manhattan.

Pandit, 51, and Chairman Win Bischoff stepped in to lead the biggest U.S. bank by assets following the ouster last November of Charles O. ``Chuck'' Prince. Citigroup has reported more than $30 billion of writedowns on subprime mortgages, bonds and non-investment grade corporate loans, leading to the worst losses in the New York-based company's history.

Pandit's comments echo remarks by Jamie Dimon, his counterpart at JPMorgan Chase & Co., who said April 16 that the credit-market freeze is more than half over. Richard Fuld, CEO of Lehman Brothers, Goldman Sachs Group Inc. head Lloyd Blankfein and Morgan Stanley chief John Mack have offered similar assessments.

Citigroup's capital cushion has been so depleted that the firm had to sell $6 billion of preferred shares yesterday. Citigroup had raised $30 billion since December, mostly by selling stakes to investment funds controlled by the governments of Abu Dhabi, Kuwait and Singapore.

Shareholders including the American Federation of State, County and Municipal Employees have called for a breakup of the bank. The labor union's pension fund holds about 100,000 Citigroup shares. Pandit said today he would ``aggressively'' shed ``non-core assets.''

Dividend Unchanged

RiskMetrics Group Inc., a financial analysis company whose clients include 70 of the biggest 100 investment managers, earlier this month urged shareholders to vote against four Citigroup board members, including Time Warner Inc. Chairman Richard Parsons, the head of the bank's compensation committee. RiskMetrics also opposed Calpine Corp. Chairman Kenneth Derr, Alcoa Inc. CEO Alain Belda and Xerox Corp. CEO Anne Mulcahy.

Oppenheimer & Co.'s Meredith Whitney said yesterday that Citigroup may have to cut the company's dividend for a second time this year as losses escalate. The bank cut the payout by 41 percent in January, the first reduction since the early 1990s. Citigroup declared a dividend of 32 cents a share yesterday, leaving the amount unchanged from last quarter.

Banks, brokerages and insurance companies have led the Standard & Poor's 500 Index's decline from an October record. Deterioration in the housing market sparked $290 billion in credit losses and asset writedowns and pushed the U.S. economy to the brink of recession. Financial companies in the S&P 500 have averaged first-quarter profit declines of 85 percent from a year earlier, the biggest drop among 10 industries, according to data compiled by Bloomberg.

$10 Billion Loss

Citigroup's shares have plunged 55 percent since the end of 2006 to the lowest in almost a decade, erasing gains made under former Chairman and CEO Sanford ``Sandy'' Weill, who built the company through a series of acquisitions over 17 years. Weill stepped down in 2003 and tapped Prince as his successor.

Prince was forced to resign last November as the bank headed for a record fourth-quarter loss of almost $10 billion. On April 18 the company posted a $5.11 billion net loss for the first quarter and announced plans to cut 9,000 jobs.

Citigroup set aside about $1.8 billion to increase reserves for bad consumer loans, saying the housing market decline and rising unemployment were putting more borrowers behind on payments. Delinquencies rose on mortgages, unsecured personal loans, credit cards and auto loans.

`Never Say Never'

A weakening U.S. economy and rising consumer delinquencies have forced Pandit and Chief Financial Officer Gary Crittenden to back away from assurances earlier this year that the bank didn't need to raise more capital. In January, Crittenden said Citigroup ``stress-tested'' its assumptions under ``multiple recessionary scenarios.''

He said on a conference call with analysts last week that management would do ``whatever is necessary to ensure we have a strong capital base.'' When asked if the bank might seek an additional capital infusion, he said, ``You can never say never.''

Pandit is shedding more than $200 billion of assets to free up capital. Under Prince, Citigroup's balance sheet swelled by $689 billion, an amount larger than the entire balance sheet of Wells Fargo & Co., the fifth-biggest U.S. bank. Citigroup's Total assets stood at $2.2 trillion at the end of last year.

BLOOMBERG