Citi Faces 40 Percent Dividend Cut, Merrill to Report Larger Losses: Report

Goldman Sach analysts said Thursday that Citigroup Inc. may cut its dividend by up to 40 percent as the financial giant faces mortgage-related writeoffs that could total $18.7 billion in the fourth quarter. According to Reuters, who obtained a copy of an investor newsletter penned by Goldman analysts William F. Tanona, Betsy Miller and Neil C. Sanyal, Citigroup will announce write-downs as much as 70 percent greater than the $8 to $11 billion forecast in early November. “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,” the analysts are quoted as saying. Goldman also said it expects to see increased writeoffs at Merrill Lynch as well as the investment bank reels from historic upheaval in the secondary market. Reuters reported that Goldman’s analysts expect an additional $11.5 billion write-off from Merrill Lynch & Co. in the fourth quarter. The news of increased losses comes as a news brief at National Mortgage News Online on Wednesday alleged that Merrill’s subprime lending arm First Franklin Mortgage had seen 60 percent (400 positions) of account executives eliminated at the firm since late August. Shares of both Merrill Lynch and Citi were off prior day’s market close in pre-market trading, as of when this post was published. Disclosure: The author holds no positions in MER or C.