Fitch lowers Citigroup to C/D

Fitch Ratings said it downgraded Citigroup Inc.'s individual rating to C/D from C, lowered its preferred stock to BB from BBB and kept the ratings on Rating Watch negative.

The agency also affirmed Citi's A+ long-term and F1+ short-term issuer default ratings given Citi's systemic importance and the magnitude of support measures from the U.S. government. The outlook for these ratings remains stable.

Fitch said its downgrade of Citi's individual rating reflects current and expected financial performance challenges, including massive losses in the fourth quarter of 2008 and the prospect of surging asset quality problems globally.

In addition to performance challenges, the agency said the decision to increase the notching of the preferreds reflects a very high level of preferreds in the capital structure, large servicing costs on preferreds and the potential for the deferral of dividends to conserve capital. Following the U.S. government capital injections, preferreds and trust preferreds now total over $100 billion versus tangible common equity of $29 million at the end of 2008, and Fitch said quarterly costs associated with these instruments now total $1.8 billion.

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