Citigroup shares fall over forecast on write-down

Shares of Citigroup Inc. fell Friday after a CLSA analyst issued a note forecasting the bank would write down as much as $10 billion in its fourth quarter.

Citigroup stock fell 28 cents, or 6.5 percent, to $4.03, in afternoon trading.

In a note to investors, CLSA analyst Mike Mayo said he expects the bank to write down $10 billion in deferred tax assets.

Deferred tax assets can emerge from operating losses, and can be used to offset future tax expenses. Companies must be able to show they will be profitable if they intend to use the tax asset for earnings in later periods.

But Mayo wrote that more companies might be pressured to write down deferred tax assets "given additional scrutiny related to year-end financial reporting."

He noted that Citigroup had $38 billion in deferred tax assets in the third quarter, the value of which might not get realized for several years.

Mayo also noted that there could be more scrutiny of deferred tax assets in general. "If so, the implications are significant given that any write-downs can cause lower capital, lower book value, and even lower tangible book value," Mayo wrote.

The concern over deferred tax assets applies not only to banks, but to any companies in industries including homebuilders, autos and others with losses from the recession, Mayo wrote.

Earlier this month, Citigroup said its third-quarter results were weighed down by $8 billion in failed loans.

The company last year lost nearly $19 billion and needed a $45 billion government bailout.