$11 billion might not be end of write-down at Citigroup

NEW YORK -- The largest U.S. bank also reduced previously reported third-quarter profit because it expects worsening credit market problems to reduce future cash flow.

"There's no way I think anyone can give you an assurance of how things are going to move," Chief Financial Officer Gary Crittenden said on a conference call. "We've taken what we think is a reasonable stab."

Citigroup's struggles come as the bank faces a leadership void following Chairman and CEO Charles Prince's resignation on Sunday.

Prince left after a four-year tenure during which the bank's shares fell 17% amid criticism Citigroup had grown unwieldy and lacked direction. Some investors want the bank, which has $2.4 trillion of assets, to be broken up. Former U.S. Treasury secretary Robert Rubin, who led the bank's executive committee, is now chairman. Sir Win Bischoff, head of the European business, became acting CEO.

Citigroup shares fell $1.83 to $35.90 and set a 4½-year low. The expected $8 billion to $11 billion write-down the bank announced is equal to $5 billion to $7 billion after taxes. Citigroup on Oct. 15 wrote off $1.6 billion for its subprime portfolio for the third quarter, part of an overall $6.5 billion write-down. The new write-down reflects problems discovered since then. "It shows the clumsiness of pricing mechanisms across Wall Street," says Michael Holland, founder of money manager Holland & Co. He says it's difficult to value Citigroup "until the dust settles."

Moody's Investors Service cut Citigroup's long-term rating one notch to "Aa2," the third-highest investment grade, from "Aa1." Fitch downgraded Citigroup to "AA," its third-highest investment grade, and Standard & Poor's warned it may cut Citigroup's "AA" rating, saying the bank could face a difficult environment across a number of fronts. Moody's and Fitch both assigned a negative outlook to the rating, indicating another downgrade is likely over the long term.