S&P maintains credit watch on Citigroup

Global credit rating agency Standard and Poor's (S&P) has maintained a credit watch with negative implications on troubled financial giant Citigroup Inc, after it received a multi-billion dollar rescue package from the US government.

"We expect the support to reduce impact of deteriorating asset quality on the ratings and help to restore confidence in the company. As a result, we no longer believe that ratings would fall more than one notch by year-end," S&P's Credit Analyst Tanya Azarchs said.

"However, we would provide our stand-alone assessment of creditworthiness, which excludes government support. This assessment could be lower than the issuer credit rating, to reflect the potential for substantial asset-quality deterioration," Azarchs added.

S&P maintained credit watch with negative implications on the counterparty credit rating of 'AA-' on Citigroup Inc. 'AA-' refers to an investment grade rating but involving a higher degree of long-term risk.

"The guarantee package on $306 billion of assets provided by the US government as well the equity investment, are, in our view, a clear message of support for this and other systematically important banks, the agency said.

"In our view, the immediate package is sufficient to limit the downside risk represented by the troubled assets. It should also remove the causes of a crisis of confidence that could have overtaken the organisation," it said.

The US government is investing in $20 billion of preferred stock that is redeemable at Citigroup's option for common stock or cash.