Citi could cut dividend by 40%

Goldman Sachs analysts said the bank might write down billions more than expected and cut its dividend to preserve capital.

NEW YORK (AP) -- Citigroup could cut its dividend by 40 percent and write down billions of dollars more than expected in the fourth quarter, Goldman Sachs analysts said, forcing it to raise even more capital than it already has.
"Although we have seen many firms take the appropriate actions in recent weeks as they relate to write-downs and capital raises, we still believe it will be a couple of quarters before the current credit crisis is fully digested by the markets," wrote Goldman analysts William F. Tanona, Betsy Miller and Neil C. Sanyal in a note to investors late Wednesday.
The analysts said Citi could write off as much as $18.7 billion in the fourth quarter.
Goldman's projection estimates write-offs as much as 70 percent higher than the $8 billion to $11 billion Citi forecast in early November, when it ousted Chief Executive Charles Prince as the extent of its bad bets in mortgage-related debt became known.
They also suggested the bank could cut its dividend by 40 percent and may need to raise $5 billion to $10 billion more cash.
That would come on top of a $7.5 billion infusion Citi received when it sold a 4.9 percent stake to the Abu Dhabi Investment Authority in late November.
Goldman increased its estimate for a fourth-quarter loss to $1.33 per share, from 52 cents per share, based on the higher writedown prediction. Analysts polled by Thomson Financial, on average, predict a loss of 63 cents per share for the fourth quarter, which ends Monday.
Citi (C, Fortune 500) shares edged down 15 cents in premarket trading, from their close Wednesday at $30.45.
CIBC perdicts more losses for Merrill Lynch
The Goldman team also said they expect an additional $11.5 billion write-off from Merrill Lynch & Co., and increased their loss estimate for the broker to $7 per share for its fourth quarter, versus a prior forecast for a loss of $1.50 per share. Wall Street, on average, expects Merrill to report a loss of $2.78 per share, according to Thomson Financial.
Merrill (MER, Fortune 500) shares were trading flat in the premarket from their $54.54 close.
For JPMorgan, the Goldman analysts see a $3.4 billion writedown, and cut their profit estimate to 65 cents per share, from $1.04, noting in particular concerns about "higher charge-offs and provisions for the firm's consumer business, particularly credit cards and mortgage."
Analysts, on average, see JPMorgan (JPM, Fortune 500) posting a profit of $1.03 per share, according to Thomson Financial. JPMorgan shares closed at $44.94 Wednesday and were trading down slightly in very light trading early Thursday.