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Citigroup's 15 Disastrous Days

Friday, February 22, Citigroup Inc. revealed in its annual report that its investment bank piled up daily losses of $100 million or more on 15 separate occasions last year.

In the 200-plus page report, Citigroup said off-balance-sheet entities connected to it had total assets of $356 billion in 2007, compared to $388 billion at the end of 2006. However, Citigroup still carries $58 billion in structured investment vehicle (SIV) assets on its books that were not included in the prior year's tally.

Of those assets, Citigroup stands to loss up to about $152 billion, compared to $148 billion the previous year. About $14 billion of this potential loss comes from the bank's continuing exposure to collateralized-debt obligations (CDOs) which analysts fear could face further downgrades.

At the end 2007, Citigroup consolidated more than $20 billion in such CDO assets, which were previously kept off its books. If worse comes to worse, Citigroup could be required to bring an additional $38 billion in CDO assets onto its books at a time when it is trying to trim its balance sheet.

Adding to investors' worries, Citigroup disclosed in the annual report for the first time that its investment bank is holding about $20 billion of hard-to-value trading positions that are directly or indirectly tied to the global commercial real estate market. The report did not elaborate on the types of investments the bank is holding. Citigroup warned that its trading portfolio may suffer with the possibility that commercial real-estate is likely to lose value in the coming year.

A Citigroup spokeswoman said the report “highlights the volatility that existed in the markets in 2007. There were many days when we saw significant gains, including more than 55 where revenue gains exceeded $100 million.” However, recent write-downs and losses have already made Citigroup a poster child for sloppy risk management. Meanwhile, analysts and investors are still waiting for Citigroup's new chief executive, Vikram Pandit, to publicly unveil his turnaround plan for the company.

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