The full fury of the subprime-mortgage crisis hit Wall Street on Tuesday as Citigroup reported a nearly $10 billion quarterly loss, and...
The full fury of the subprime-mortgage crisis hit Wall Street on Tuesday as Citigroup reported a nearly $10 billion quarterly loss, and both Citigroup and Merrill Lynch received sorely needed capital infusions to shore up their financial stability.
Citigroup, which said it took an $18.1 billion write-down on subprime-related securities in the quarter, also slashed its dividend 41 percent and said it would cut 4,200 jobs in what is expected to be the opening volley of layoffs stretching through the year.
Financial stocks plunged on the news, sending the stock market to its lowest level since the credit market debacle began in summer. The Dow Jones industrial average plunged 277 points.
In recent weeks, major investment banks have been forced to raise more than $50 billion — most of it from cash-rich foreign governments and related entities — to fortify themselves after record-setting subprime-related losses.
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Citigroup reported a fourth-quarter loss of $9.83 billion, or $1.99 a share, compared with a profit of $5.1 billion, or $1.03 a year earlier. It was the largest loss in the bank’s 196-year history, according to Bloomberg News.
The $18.1 billion write-off exceeded the $8 billion to $11 billion estimate Citigroup made in November, which itself topped the $5.9 billion third-quarter write-down it had taken a month earlier and which led to the resignation of CEO Charles Prince.
“Our financial results this quarter are clearly unacceptable,” said Vikram Pandit, who took over as chief executive.
To conserve cash, Citigroup hacked its dividend to 32 cents a share from 54 cents.
Its shares sank $2.12, or 7.3 percent, to close at $26.94, a new multiyear low.
Citigroup said it raised $12.5 billion from outside investors, including $6.9 billion from a fund run by the government of Singapore.
The rest came from the Kuwait Investment Authority, Saudi Prince Alwaleed bin Talal — who already was a major shareholder — and Los Angeles-based money management giant Capital Research Global Investors.
Capital Research is part of Capital Group Cos., which manages the American Funds mutual-fund group and was Citigroup’s largest single institutional shareholder as of Sept. 30, with a 4.6 percent stake.
For its part, Merrill received $6.6 billion from the Korean Investment Corp., Kuwait Investment Authority and Mizuho Corporate Bank.
Merrill’s shares slid $2.12, or 5.3 percent, to $53.01.
Neither Citigroup nor Merrill was in danger of falling below federally required capital levels, but the companies raised funds in part to reassure investors and customers.