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Awaiting Citi's Big Number
by Jeffrey Cane
Jan 8 2008
Jan 8 2008
Merrill analyst forecasts a $16 billion write-down.
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Forget about the office pool on the Super Bowl or making a bet on the presidential primaries. The action on Wall Street is guessing the size of 
Citigroup's fourth-quarter write-down.
The latest betting line is from Guy Moszkowski of Merrill Lynch, who estimates that Citi will take a $16 billion write-down on investments tied to mortgages. As a result, he nearly doubled his estimate of Citi's loss for the quarter, to $1.43 per share, from 73 cents.
Earlier announcements of write-downs at Bear Stearns and Lehman Brothers, whose fourth quarter ended a month earlier than Citi's, point to "substantial deterioration in the value of the underlying securities" as well as the failure of some hedging strategies, Moszkowski wrote, according to Bloomberg News.
His estimate is in the middle of the analysts' pack. In recent weeks, Howard K. Mason of Sanford Bernstein has pegged Citi's write-down at $12 billion, while William Tanona of Goldman Sachs has estimated $18.7 billion.
As the Financial Times' Alphaville blog puts it: "It's a bit like guessing the number of pennies in a jar. Except the jar is the world's biggest bank. And the pennies are quite big, too."
Citigroup, which estimated in early November that it would need to write down at least $8 billion to $11 billion, reports fourth-quarter results on January 15.
Citigroup's fourth-quarter write-down. The latest betting line is from Guy Moszkowski of Merrill Lynch, who estimates that Citi will take a $16 billion write-down on investments tied to mortgages. As a result, he nearly doubled his estimate of Citi's loss for the quarter, to $1.43 per share, from 73 cents.
Earlier announcements of write-downs at Bear Stearns and Lehman Brothers, whose fourth quarter ended a month earlier than Citi's, point to "substantial deterioration in the value of the underlying securities" as well as the failure of some hedging strategies, Moszkowski wrote, according to Bloomberg News.
His estimate is in the middle of the analysts' pack. In recent weeks, Howard K. Mason of Sanford Bernstein has pegged Citi's write-down at $12 billion, while William Tanona of Goldman Sachs has estimated $18.7 billion.
As the Financial Times' Alphaville blog puts it: "It's a bit like guessing the number of pennies in a jar. Except the jar is the world's biggest bank. And the pennies are quite big, too."
Citigroup, which estimated in early November that it would need to write down at least $8 billion to $11 billion, reports fourth-quarter results on January 15.
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