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Subprime mortgages -- loans given to customers with poor credit history
-- have gone delinquent or defaulted at rising rates in recent months, causing banks to lower the value of the loans as investors shy away from buying them.
Weakness in that business spread to other credit markets, leaving banks stuck with loans they promised during the merger and acquisition boom.
Citigroup will write down about $1.4 billion on funded and unfunded loan commitments when it announces its third-quarter results. It will record losses of about $1.3 billion on the value of securities backed by subprime loans. Citigroup will also record a loss of $600 million in fixed-income credit trading due to market volatility.
Third quarter global consumer credit costs also increased $2.6 billion from the same quarter a year ago, the company said. About 75 percent of that increase is due to rising loan-loss reserves
-- money held to cover loans that default.
Citigroup shares fell 87 cents, or 1.9 percent, to $45.80 in pre-market trading on Monday.
Citigroup moved its earnings release date to Oct. 15 from Oct. 19.
[Associated Press]
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