Citigroup Inc., a pet stock on Wall Street this year, got a rare downgrade Monday from Raymond James & Associates Inc. analyst Richard X. Bove.

Mr. Bove, who had rated Citi a "strong buy" since July 1999, said he cut his rating two tiers to "market perform" because he doubts a company so heavily focused on consumers can withstand the economic downturn. He also said that the current economic trouble in South America could soon hit Citi's earnings. These are "an awful lot of issues in an awful lot of areas," he said. Many economists are predicting an economic upswing, but Mr. Bove noted that the June unemployment rate rose 0.6%, to 4.5%, and that consumer bankruptcies jumped 18% in the first quarter. Both are bad news for Citi's consumer credit and card businesses, he said.

On Monday the Federal Reserve reported a rise in outstanding consumer credit of 5% in May, the smallest increase since October and down from 10.5% in April.

Mr. Bove's earnings outlook for Citi is below consensus and may be revised down further, he wrote in a research note Monday. He said he expects Citi to report per-share earnings of 71 for the second quarter and $2.90 for the year, against the analyst consensus of 73 cents and $3.01, according to First Call/Thomson Financial.

David S. Berry, director of research at Keefe, Bruyette & Woods Inc. in New York, said diversification might not shield Citi from all economic misfortune, but that he expects the company to do better than most in the financial services sector, even if the economy takes a turn for the worse. He predicts that it will post per-share earnings of 74 cents for the second quarter and $3 for the full year, and he has a "buy" rating on Citigroup.

Mr. Berry's assessment is in line with the prevailing view of Citigroup's prospects. According to Bloomberg data, most U.S. banking analysts rate Citi a "strong buy" or "buy." (Only Charles W. Peabody of Mitchell Securities keeps the company on "sell.")

Mr. Berry, who has cut his earnings estimates for Citi considerably since the beginning of this year, said economic indicators are sending mixed signals. He pointed to the uptick in consumer bankruptcies as particularly worrisome, though he said "the consumer seems to handle delinquencies well."

Citi's shares rose 0.02% Monday. Mr. Bove said he sees problems for Citi's earnings well beyond the next couple of quarters, even if consumers keep spending. Equity underwriting and trading is weakening and will affect Salomon Smith Barney's contribution to Citi's earnings, he said. And declining sales of mutual funds will harm revenues from Primerica, a Citi financial planning unit.

Latin America, a major focus of expansion for Citi, could prove another trouble spot. Mr. Bove said he is convinced that an economic downturn in that region will lead to currency devaluations in Mexico and Brazil. He added that though Citigroup is far more diversified than it was in the 1980s, "Latin America's problems could still be painful."

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