Fears remain over Citi loan exposure

Analysts have expressed concern over the scale of Citi’s exposure to leveraged loans after they met with the bank’s head of risk management.

Citi is among a number of banks committed to provide financing for some leveraged buyouts that are facing resistance from investors but it has greater exposure than its rivals.

The claim was made in a research note by JP Morgan Chase analyst Vivek Juneja reported by MarketWatch.

Juneja said: “LBO lending uncertainty remains regarding size of mark to market hit. It is disappointing to see Citi well above peers in pending deals."

If banks cannot sell on leveraged loans in the market, they have to keep them on their balance sheets as so-called "hung loans". Such holdings may have a lower value than if they had been successfully sold.

Citi has retained a bullish stance on LBO financing despite warnings that it could face a $1bn (€740m) write-down of third-quarter profits due to the credit market turmoil. The bank is pushing ahead with lead-underwriting part of the multi-billion dollar debt financing behind the buyouts of Canadian telecoms firm BCE and US chemicals group Lyondell.

In July, Citi’s chairman and chief executive Chuck Prince, chairman and chief executive, was criticised for saying Citi was "still dancing" in the credit markets.

The scale of banks’ exposure to leveraged loans will become clearer next week when the third quarter reporting season for US banks kicks off.