Citigroup closes UK sub-prime operations

Advisers face an uphill struggle to place sub-prime business as Citigroup joins the mass exodus and closes its sub-prime lending operations in Britain.

Joining other investment banks, the increasingly beleaguered American bank has closed Future Mortgages, its mortgage operation and CitiFinancial, its unsecured loans business. The move will lead to the loss of 700 jobs as 49 CitiFinancial branches, employing 300 people, and its Doxford call centre, employing 400, will be closed.

Citigroup has confirmed all staff affected have entered into a consultation period.

The news has been met with dismay by advisers who claim it is now virtually impossible to find a deal for a client with a less then perfect credit history.

Chris Mottola, mortgage consultant for Southampton-based Choice Financial Solutions, said credit conditions had become so stringent many clients were now simply stranded on high-interest deals.

He said: "It is just impossible to find anyone wishing to lend. The ones officially left in the market are actively seeking to put off any potential customers. To be honest, it can be a bit of a nightmare."

According to Moneyfacts, the number of sub-prime products on the market only represent one fifth of the figure last year, falling from 7000 to 1500.

Citigroup's announcement comes on the back of a tough nine months for the bank. Back in November Citigroup was a recipient of £3.6bn from the government agency, the Abu Dhabi Investment Authority. The move lead to the resignation of Charles Prince, its chief executive.

However, this was not enough to stem the sub-prime losses as Citigroup reported a £5bn net loss for the last three months of 2007 in January. At the time, Vikram Pandit, Mr Prince's successor, said the loss had been caused by a £9bn exposure to bad mortgage debt, admitting revenues during the fourth quarter fell 70 per cent from a year earlier to £3.5bn. He also announced job cuts totalling 4200.

The losses were coupled with an announcement that Citigroup, the largest banking group in the US, was set to get a second cash injection. This time it was for £3.3bn from Singapore government investment agency GIC, while the Kuwait Investment Authority said it had bought a £1.4bn stake in the firm.

This year has not proven any better for the bank unveiling further losses of £2.7bn in the first quarter. The results included about £5.8bn of write-downs for sub-prime mortgages and other risky assets.