US financial giant Citigroup announced a radical overhaul of its troubled US mortgage business on March 06 aimed at stemming multibillion dollars losses triggered by America's housing slump.
The New York-based banking group said it would no longer offer certain types of riskier mortgage loans and that it was sharply cutting back its mortgage investments.
"This end-to-end realignment will create a simplified and streamlined organisation that is more sharply focused on clients," said Bill Beckmann, the president of CitiMortgage Inc.
The bank is tightening its home loan underwriting procedures and said its mortgage businesses will be integrated under its new CitiMortgage division. Citigroup has seen its finances and share price ravaged by the US housing downturn and a related credit crunch that has afflicted a widening range of exotic securities and investments.
Top executives have blamed the housing crisis for Citigroup's huge fourth quarter loss of 9.83 billion dollars which contributed to the resignation of former chief executive Charles Prince.
Citigroup's new CEO, Vikram Pandit, is vying to stem the global bank's losses and shore up its stressed balance sheet, partly through raising fresh capital from foreign investment funds such as the Government of Singapore Investment Corporation Pte Ltd.
Executives plan to cut residential mortgage assets in Citigroup's US mortgage business by approximately 45 billion dollars in the next year, marking a 20 percent drop from December 2007.
The bank,one of the largest in the US, said it also intends to slash the volume of new mortgage loans held in its investment portfolios by over 50 percent in the next 12 months.
Citi said it was also integrating some offices to further slash costs. It expects the overhaul to yield annual expense savings of around 200 million dollars. Executives said Citigroup would no longer market certain mortgages, including loans for some investment properties and subprime loans granted to Americans with poor credit.
Subprime home loans, which have experienced high default rates in recent years, were granted to millions of Americans during a housing boom which ran out of steam in early 2006.
Citigroup announced its overhaul after US stock markets had closed for the day. Its shares fell 4.4 percent to 21.17 dollars on March 06 amid wider market losses.
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