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30 April 2008

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Banking giant Citigroup is facing an erosion in share value, following its announcement of a $3 billion rights issue in order to help restore its balance sheet.

The firm's stock dropped 3.8 per cent on the New York market yesterday on the news - which brings its total fall for 2008 to 11 per cent so far.

Citi has been forced to write down $10 billion of financial products in the last quarter alone due to its exposure to the now-collapsed US sub-prime market.

Thousands of jobs have also been cut at the bank recently.

Analyst at Oppenheimer & Co Meredith Whitney, told Bloomberg: "We believe Citi needs to raise an additional $10-$15 billion or sell several hundreds of billions worth of assets in order to truly shore up its capital position.''

Commenting on the new rights issue, former shareholder William Fitzpatrick added: "We were hoping they wouldn't have to go the equity markets like this…this was extremely disappointing."

Citi has sold equity to the sovereign wealth funds of the United Arab Emirates, Singapore and Kuwait, following the onset of the credit crunch last year.

A total exceeding $30 billion has been raised by the firm in this way.

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