Citigroup may have to write down about $10 billion in deferred tax assets in the fourth-quarter, according to CLSA banking analyst Michael Mayo. The report sent shares down over 5 percent.
Citigroup says it has no idea how any analyst, including Mayo, may have gotten to this estimate.
Mayo disclosed his expectation that more writedowns were ahead in a conference call Friday. In the wake of this disclosure, shares of banking stocks, including Citigroup, were trading lower.
Deferred tax assets can be used to offset future gains. However, if over time, a company does not have gains to offset, the value of the deferred tax assets must be written down.
Mayo estimates the $10 billion writedown would be equal to about 25 percent of Citigroup's existing $38 billion in deferred tax assets, and about 10 percent of Citigroup's tangible equity.
According to Mayo, Citigroup may be able to offset a portion of the expected write down with other gains.
