Citigroup, which last week posted a record US$9.83 billion quarterly loss, yesterday said it had strengthened its balance sheet and replenished depleted capital levels by raising about US$30 billion ($40 billion) in the last two months.
After US$18.65 billion of offerings last week, the largest US bank saidit expected to finish the fourth quarter on a pro forma basis with an 8.8 per cent Tier-1 capital ratio and a 6.9 per cent ratio of tangible common equity to risk-weighted assets. The bank's respective targets are 7.5 per cent and 6.5 per cent.
Citigroup moved to bolster capital levels in the wake of deteriorating housing and credit markets, which led to more than US$30 billion of debt write-downs and credit losses over the last two quarters.
"We wanted to make sure that we can put capital to work for our clients and capture market opportunities for our shareholders," said chief executive Vikram Pandit. Last week Citigroup said it ended 2007 with a Tier-1 ratio of 7.1 per cent, down from 8.59 per cent a year earlier. Regulators consider banks well-capitalised when they maintain a 6 per cent Tier-1 ratio, which measures the ability to cover losses.
Citigroup's capital-raising included several offerings of preferred shares, much of which can be convertible into common stock at a later date.
Among the investors were funds affiliated with the Abu Dhabi, Kuwait and Singapore governments; former Citigroup Chief Executive Sanford "Sandy" Weill; and Saudi Prince Alwaleed bin Talal, Citigroup's largest individual shareholder.
