Preferred debt and bank financial strength ratings lowered
New York, January 21, 2009 -- Includes Citigroup Global Markets Inc. in the rating action list;
Prime-1 commercial paper rating placed on review for possible downgrade.
Revised release follows.
Moody's Investors Service placed the long and short-term ratings
of Citigroup Inc. (senior debt at A2 and short-term at Prime-1)
under review for possible downgrade. Moody's also placed the long-term
ratings of Citigroup's lead bank, Citibank N.A. (long-term
bank deposits at Aa3) under review for possible downgrade. The
Prime-1 rating on the bank for short-term obligations was
affirmed. Moody's also lowered its ratings on preferred stock issued
by Citigroup Inc. to Baa3 from Baa2 and cut its bank financial
strength rating on Citibank N.A. to C- from C,
which translates to a change in the baseline credit assessment to Baa1
from A3. Both the preferred stock rating and the financial strength
ratings are under review for possible downgrade. These actions
had no impact on the FDIC-guaranteed debt issued by Citigroup which
remains at Aaa with a stable outlook.
The downgrade of the financial strength rating reflects further deterioration
in Citibank's standalone creditworthiness that is represented by its relatively
low tangible common equity ratio and growing pressures on its franchise
value. Moody's said that the downgrade of the holding company's
preferred stock was in response to an increase in the possibility that
preferred dividends could be deferred. "Citigroup's current preferred
dividend payments are a hurdle for future capital generation, especially
when considering Citigroup's poor earnings prospects for 2009,"
said Moody's Senior Vice-President, Sean Jones.
Moody's review will focus on three issues: the potential for and
possible implications of further systemic support, Citigroup's financial
prospects, and the credit implications of Citigroup's strategic
initiatives
Moody's believes that Citigroup enjoys a very high level of systemic support
from the U.S. government. Citibank's deposits now
benefit from four notches of ratings lift as a result of this support
assumption. "Recent government actions confirm that Citigroup is
systemically important" , said Mr. Jones. However,
Moody's will consider the extent of this ratings lift during its review.
Regarding Citigroup's financial prospects, Moody's said that the
credit costs taken against many of Citigroup's investment banking portfolios
and U.S. consumer assets in the fourth quarter were within
its recently increased expectations. However, the sizable
marks Citigroup took against its derivatives portfolio were not incorporated
in Citigroup's ratings. Those marks resulted from changes in Citigroup's
credit spreads and those of its counterparties. Moody's said it
will review the potential need for further increases in the credit valuation
allowances and the implications of this on Citigroup's credit strength.
Moody's noted that the U.S. government's Eligible Asset
Guarantee Program does not include some of Citigroup's investment banking
assets. The program covers $301 billion of assets in which
Citigroup has a $29 billion first-loss position.
Moody's initially believed that the program was sufficient to cover all
of Citigroup's problematic investment banking portfolios. These
portfolios have been subject to very sizable marks, including in
the fourth quarter of 2008. Some of these portfolios will not be
covered under the asset guarantee program, leaving Citigroup exposed
to any further deterioration. Moody's noted that a high proportion
of those assets, going forward, will not be subject to mark-to-market
valuations, which will potentially lead to greater earnings stability.
The review will focus on these financial issues in the context of Citigroup's
capital structure, which is highly skewed towards hybrid securities
as opposed to tangible common equity.
The third major area for review is the credit impact of Citigroup's proposed
reorganization. While the proposal will enhance management focus
on the numerous challenges Citigroup faces, in the longer-term
it could also facilitate the sale of stronger businesses within the new
"Citicorp" that might diminish the overall credit profile of the holding
company. Moody's noted that the proposed reorganization does not
entail any changes to Citigroup's legal structure.
Moody's last rating action was on December 18th , 2008 when the
ratings of Citigroup Inc. were lowered to A2 from Aa3, and
the rating on Citibank N.A. for deposits were lowered to
Aa3 from Aa1, and the financial strength rating on Citibank N.A.
was lowered to C from B.
The principal methodologies used in rating this issuer were "Bank Financial
Strength Ratings: Global Methodology" (February 2007) and "Incorporation
of Joint-Default Analysis into Moody's Bank Ratings: A Refined
Methodology" (March 2007), which can be found at www.moodys.com
in the Credit Policy & Methodologies directory, in the Ratings
Methodologies subdirectory. Other methodologies and factors that
may have been considered in the process of rating this issuer can also
be found in the Credit Policy & Methodologies directory.
Citigroup Inc. is headquartered in New York City, and its
reported assets were $2 trillion as of December 31st 2008.
Issuer: Citigroup Global Markets Inc.
.. On Review for Possible Downgrade
... Commercial Paper, Placed on Review for
Possible Downgrade, currently P-1
..Outlook Actions:
....Outlook, Changed To Rating Under
Review From Stable
Issuer: CitiFinancial Credit Company
..On Review for Possible Downgrade:
.... Issuer Rating, Placed on Review
for Possible Downgrade, currently A2
....Junior Subordinated Shelf, Placed
on Review for Possible Downgrade, currently (P)A3
....Senior Unsecured Medium-Term Note
Program, Placed on Review for Possible Downgrade, currently
A2
....Senior Unsecured Regular Bond/Debenture,
Placed on Review for Possible Downgrade, currently A2
....Senior Unsecured Shelf, Placed on
Review for Possible Downgrade, currently (P)A2
..Outlook Actions:
....Outlook, Changed To Rating Under
Review From Stable
Issuer: CitiFinancial Europe PLC
..On Review for Possible Downgrade:
....Multiple Seniority Medium-Term
Note Program, Placed on Review for Possible Downgrade, currently
a range of A3 to P-1
..Outlook Actions:
....Outlook, Changed To Rating Under
Review From Stable
Issuer: Citibank (South Dakota), N.A.
..On Review for Possible Downgrade:
.... Bank Financial Strength Rating,
Placed on Review for Possible Downgrade, currently C-
.... Issuer Rating, Placed on Review
for Possible Downgrade, currently Aa3
....OSO Senior Unsecured OSO Rating,
Placed on Review for Possible Downgrade, currently Aa3
....Senior Unsecured Deposit Rating,
Placed on Review for Possible Downgrade, currently Aa3
..Outlook Actions:
....Outlook, Changed To Rating Under
Review From Stable(m)
Issuer: Citibank Europe plc
..Downgrades:
.... Bank Financial Strength Rating,
Downgraded to C- from C
..On Review for Possible Downgrade:
....Senior Unsecured Deposit Rating,
Placed on Review for Possible Downgrade, currently A1
..Outlook Actions:
....Outlook, Changed To Rating Under
Review From Stable(m)
Issuer: Citibank International Plc
..Downgrades:
.... Bank Financial Strength Rating,
Downgraded to C- from C
..On Review for Possible Downgrade:
....Multiple Seniority Medium-Term
Note Program, Placed on Review for Possible Downgrade, currently
a range of A2 to A1
....Senior Unsecured Medium-Term Note
Program, Placed on Review for Possible Downgrade, currently
A1
....Senior Unsecured Regular Bond/Debenture,
Placed on Review for Possible Downgrade, currently A1
....Senior Unsecured Deposit Rating,
Placed on Review for Possible Downgrade, currently A1
..Outlook Actions:
....Outlook, Changed To Rating Under
Review From Stable(m)
Issuer: Citibank, N.A.
..Downgrades:
.... Bank Financial Strength Rating,
Downgraded to C- from C
..On Review for Possible Downgrade:
.... Issuer Rating, Placed on Review
for Possible Downgrade, currently Aa3
....OSO Senior Unsecured OSO Rating,
Placed on Review for Possible Downgrade, currently Aa3
....Senior Unsecured Deposit Note/Takedown,
Placed on Review for Possible Downgrade, currently Aa3
....Senior Unsecured Medium-Term Note
Program, Placed on Review for Possible Downgrade, currently
a range of (P)Aa3 to Aa3
....Senior Unsecured Regular Bond/Debenture,
Placed on Review for Possible Downgrade, currently Aa3
....Senior Unsecured Deposit Rating,
Placed on Review for Possible Downgrade, currently Aa3
..Outlook Actions:
....Outlook, Changed To Rating Under
Review From Stable(m)
Issuer: Citibank, N.A. (Auckland Branch)
..On Review for Possible Downgrade:
....Senior Unsecured Medium-Term Note
Program, Placed on Review for Possible Downgrade, currently
Aa3
..Outlook Actions:
....Outlook, Changed To Rating Under
Review From Stable
Issuer: Citibank, N.A. (London Branch)
..On Review for Possible Downgrade:
....Senior Unsecured Medium-Term Note
Program, Placed on Review for Possible Downgrade, currently
Aa3
....Senior Unsecured Regular Bond/Debenture,
Placed on Review for Possible Downgrade, currently Aa3
..Outlook Actions:
....Outlook, Changed To Rating Under
Review From Stable
Issuer: Citibank, N.A. (Sydney Branch)
..On Review for Possible Downgrade:
....Senior Unsecured Medium-Term Note
Program, Placed on Review for Possible Downgrade, currently
Aa3
..Outlook Actions:
....Outlook, Changed To Rating Under
Review From Stable
Issuer: Citicorp
..Downgrades:
....Multiple Seniority Shelf, Downgraded
to (P)Baa3 from (P)Baa2
....Preferred Stock Preferred Stock,
Downgraded to Baa3 from Baa2
..On Review for Possible Downgrade:
....Multiple Seniority Medium-Term
Note Program, Placed on Review for Possible Downgrade, currently
a range of A3 to A2
....Multiple Seniority Shelf, Placed
on Review for Possible Downgrade, currently a range of (P)A3 to
(P)A2
....Subordinate Medium-Term Note Program,
Placed on Review for Possible Downgrade, currently A3
....Subordinate Regular Bond/Debenture,
Placed on Review for Possible Downgrade, currently A3
....Senior Unsecured Medium-Term Note
Program, Placed on Review for Possible Downgrade, currently
A2
..Outlook Actions:
....Outlook, Changed To Rating Under
Review From Stable
Issuer: Citigroup Finance Canada Inc
..On Review for Possible Downgrade:
....Senior Unsecured Medium-Term Note
Program, Placed on Review for Possible Downgrade, currently
A2
....Senior Unsecured Regular Bond/Debenture,
Placed on Review for Possible Downgrade, currently A2
..Outlook Actions:
....Outlook, Changed To Rating Under
Review From Stable
Issuer: Citigroup Funding, Inc.
..On Review for Possible Downgrade:
.... Issuer Rating, Placed on Review
for Possible Downgrade, currently a range of A2 to P-1
....Multiple Seniority Medium-Term
Note Program, Placed on Review for Possible Downgrade, currently
a range of A3 to A2
....Multiple Seniority Shelf, Placed
on Review for Possible Downgrade, currently a range of (P)A3 to
(P)A2
....Senior Unsecured Conv./Exch.
Bond/Debenture, Placed on Review for Possible Downgrade, currently
A2
....Senior Unsecured Commercial Paper,
Placed on Review for Possible Downgrade, currently P-1
....Senior Unsecured Medium-Term Note
Program, Placed on Review for Possible Downgrade, currently
A2
....Senior Unsecured Regular Bond/Debenture,
Placed on Review for Possible Downgrade, currently A2
..Outlook Actions:
....Outlook, Changed To Rating Under
Review From Stable
Issuer: Citigroup Global Markets Holdings Inc.
..Downgrades:
....Preferred Stock Preferred Stock,
Downgraded to Baa3 from Baa2
..On Review for Possible Downgrade:
.... Issuer Rating, Placed on Review
for Possible Downgrade, currently A2
....Multiple Seniority Medium-Term
Note Program, Placed on Review for Possible Downgrade, currently
a range of A3 to P-1
....Multiple Seniority Shelf, Placed
on Review for Possible Downgrade, currently a range of (P)A3 to
(P)A2
....Senior Unsecured Conv./Exch.
Bond/Debenture, Placed on Review for Possible Downgrade, currently
A2
....Senior Unsecured Medium-Term Note
Program, Placed on Review for Possible Downgrade, currently
A2
....Senior Unsecured Regular Bond/Debenture,
Placed on Review for Possible Downgrade, currently A2
....Senior Unsecured Shelf, Placed on
Review for Possible Downgrade, currently (P)A2
..Outlook Actions:
....Outlook, Changed To Rating Under
Review From Stable
Issuer: Citigroup Global Mkts Deutsch. AG&Co
..Downgrades:
.... Bank Financial Strength Rating,
Downgraded to C- from C
..On Review for Possible Downgrade:
....Senior Unsecured Deposit Rating,
Placed on Review for Possible Downgrade, currently A1
..Outlook Actions:
....Outlook, Changed To Rating Under
Review From Stable(m)
Issuer: Citigroup Inc.
..Downgrades:
....Multiple Seniority Shelf, Downgraded
to (P)Baa3 from (P)Baa2
....Preferred Stock Preferred Stock,
Downgraded to Baa3 from Baa2
..On Review for Possible Downgrade:
.... Commercial Paper, Placed on Review
for Possible Downgrade, currently P-1
....Multiple Seniority Medium-Term
Note Program, Placed on Review for Possible Downgrade, currently
a range of A3 to P-1
....Multiple Seniority Shelf, Placed
on Review for Possible Downgrade, currently a range of (P)A3 to
(P)A2
....Subordinate Regular Bond/Debenture,
Placed on Review for Possible Downgrade, currently A3
....Senior Unsecured Medium-Term Note
Program, Placed on Review for Possible Downgrade, currently
A2
....Senior Unsecured Regular Bond/Debenture,
Placed on Review for Possible Downgrade, currently A2
..Outlook Actions:
....Outlook, Changed To Rating Under
Review From Stable
New York
Sean Jones
Senior Vice President
Financial Institutions Group
Moody's Investors Service
JOURNALISTS: 212-553-0376
SUBSCRIBERS: 212-553-1653
New York
Gregory W. Bauer
Managing Director
Financial Institutions Group
Moody's Investors Service
JOURNALISTS: 212-553-0376
SUBSCRIBERS: 212-553-1653
Correction to text, Jan. 16, 2009 Release: Moody's places Citigroup's ratings (snr at A2 and Prime-1) under review for possible downgrade
