Citigroup faces the $700m music

Citigroup faces the $700m music
By David Wighton in New York
Copyright The Financial Times Limited 2007
Published: August 11 2007 00:18 | Last updated: August 11 2007 00:18


Citigroup has lost more than $700m in credit business in recent weeks, making it one of the biggest casualties of the crisis, according to a person briefed on the situation.

The scale of the losses is not a serious problem for a company that earned more than $20bn last year and bankers believe some Wall Street rivals have lost more.

But it will be acutely embarrassing for Chuck Prince, chairman and chief executive, who has been widely criticised for saying last month that Citi was “still dancing” in the credit markets.

The losses will undermine his efforts to restore investor confidence in the world’s largest financial services company and revive its flagging share price.

They will also be a blow for Tom Maheras, head of Citigroup’s capital markets business, who recently told the Financial Times that its growth had caught up with rivals after three years of under-performance.

The losses were made largely in the structured credit business run by Michael Raynes, hired from Deutsche Bank in London last summer.

They are in addition to those Citi faces from lending commitments to leveraged buy-outs.

Mr Prince told the FT on July 10 that the lending party would end but there was so much liquidity at the time that it would not be disrupted by the turmoil in the US subprime mortgage market.

“When the music stop, in terms of liquidity, things will be complicated. But as long as the music is playing, you’ve got to get up and dance. We’re still dancing.”

Citigroup on Friday declined to comment.