NEW YORK (Reuters) - Goldman Sachs raised Citigroup Inc <C.N> debt to "outperform" from "in-line" on Friday, a day after the company said it plans to rescue $49 billion of structured investment vehicles.
By Walden Siew
NEW YORK (Reuters) - Goldman Sachs raised Citigroup Inc <C.N> debt to "outperform" from "in-line" on Friday, a day after the company said it plans to rescue $49 billion of structured investment vehicles.
The brokerage also said it still believes that Citigroup will retain its double-A ratings at all agencies, even though S&P and Fitch could downgrade it by another notch to low double-A in the short term.
Goldman also forecast further losses to be announced from collateralized debt obligation and mortgage exposure, known as residential mortgage-backed securities, or RMBS, in coming months.
!ADVERTISEMENT!Goldman said "more meaningful concern for the short term lies in further potential losses from CDO and RMBS exposures, in our view," the report said.
Goldman said it believes the newly appointed Chief Executive Vikram Pandit will take appropriate action to raise capital levels in the first quarter either through additional third-party investments, dividend cuts or reduced risk-weighted assets, or a combination of factors.
While most banks and financial industry stocks were lower, weighing on the stock market, shares of Citigroup rose 2 percent to $31.61 on the New York Stock Exchange after the Goldman news.
Citigroup's 6.125 percent notes due in 2017 gained on Friday. The spread, or yield premium investors demand to hold its bonds over Treasuries, narrowed by 3 basis points to 168 basis points, according to MarketAxess data.
(Additional reporting by Nivedita Gupta in Bangalore; Editing by Kenneth Barry)
