Citi feeling pressure to take more writedowns?

While Merrill Lynch has moved to puts its collateralized debt obligation woes behind it, Citi still has about $23 billion in net exposure to such securities. It's doubtful CDOs are going to magically recover in value anytime soon, so the bank will likely be pressured to follow the lead of Merrill Lynch. Deutsche Bank analyst Michael Mayo predicts Citi will take third-quarter writedowns of about $8 billion, reports TheStreet.com. The bank may take another $1 billion due to monoline exposure. So this raises an obvious question: Will Citi need to raise capital once again? The answer would appear to be yes if it takes another big writeoff. The issue is how to raise capital. No doubt, it's very actively shopping assets--a given. But we may see a big investment or equity issue, despite the dilutive effects. And of course, there's always the possibility of dividend action.  

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