Citigroup's problems deepened today as it was unable to assure investors a potential $11 billion writedown for subprime mortgages won't grow, and its credit rating was downgraded.
The largest US bank also reduced previously reported third-quarter profit because of credit market problems that it said could reduce future cash flow.
Citigroup chief financial officer Gary Crittenden
Citigroup also has to find new leadership after the resignation yesterday of chairman and chief executive Charles Prince.
Robert Rubin, former US treasury secretary and chairman of Citigroup's executive committee, was named chairman, while Sir Win Bischoff, head of Citigroup Europe, was named acting chief executive.
The announcement of an expected $8 billion to $11 billion writedown, equal to $5 billion to $7 billion after taxes, caused Citigroup shares to fall as much as 5.6 per cent.
Shares of other banks such as Bank of America, Merrill Lynch & Co and Morgan Stanley also fell in early trading amid concern that writedowns might not be isolated to Citigroup.
Much of Citigroup's trouble relates to $43 billion of so-called collateralised debt obligations linked to lower-quality mortgages.
While these "super-senior" securities were once considered rock-solid, investors have stopped buying them, the bank said.
"There's no way I think anyone can give you an assurance of how things are going to move," chief financial officer Gary Crittenden said. "We've taken what we think is a reasonable stab."