Nov. 12 (Bloomberg) -- Citigroup Inc. may slump below $30 a share, a drop of 11 percent from today's closing price, as U.S. bank shares extend declines on writedowns that will have a ``severe impact'' on their capital ratios, according to CIBC World Markets Inc.

Meredith Whitney, the New York-based analyst who on Nov. 1 triggered a 2.6 percent slide in the Standard & Poor's 500 Index after saying Citigroup may cut its dividend, reduced her recommendation on the biggest U.S. banks to ``underweight'' from ``market weight,'' relative to the S&P 500.

``The fourth quarter is going to be ugly,'' Whitney said in an interview. ``The pace of downgrades from the rating agencies is only accelerating.''

Among the group of large-capitalization banks covered by CIBC, the analysts have a ``sector underperformer'' recommendation on Citigroup, and ``sector performer'' ratings on Charlotte, North Carolina-based Bank of America Corp. and Wachovia Corp. They have ``sector outperformer'' ratings on JPMorgan Chase & Co. and San Francisco-based Wells Fargo & Co.

Citigroup's stock had its steepest retreat since 2002 on Nov. 1 after Whitney said the largest U.S. bank would have to cut its payout or sell assets to make up for losses. The analyst today forecast further declines for Citigroup, saying it may fall ``below $30.''

The KBW Bank Index of 24 U.S.-based lenders has already slid for three consecutive quarters, its longest losing streak, and is down 13 percent since the start of October.

Shares Advance

Citigroup climbed 47 cents, or 1.4 percent, to $33.57 at 4:00 p.m. in New York Stock Exchange composite trading as investors snapped up shares of banks that had fallen to their cheapest valuations in 12 years. The S&P 500 Diversified Financials Index last week traded at the lowest relative to its 30 members' net assets since Bloomberg began tracking the data in 1995.

Bank of America was flat $43.98, while New York-based JPMorgan rose 8 cents to $42.39. Bank of America is the second-biggest U.S. bank and JPMorgan is the third-largest.

Rating company downgrades of assets such as collateralized debt obligations may lead to a drop in banks' ratings, the CIBC analysts wrote. New York-based Citigroup's tier 1 ratio, a measure used by regulators to make sure banks have enough cash to cushion losses, fell to 7.4 percent at the end of the third quarter from 8.64 percent at the same time last year.

Whitney's downgrade of Citigroup on Nov. 1 helped wipe out $369 billion in U.S. stock market value. She predicted in that report that Citigroup will be forced to sell its ``best'' assets to raise money, which may hurt future earnings.

To contact the reporters on this story: Alexis Xydias in London at axydias@bloomberg.net; Elizabeth Hester in New York at ehester@bloomberg.net.

Last Updated: November 12, 2007 17:34 EST