Citigroup suffers thirdquarter loss fuelled by consumer debt

By James Quinn, US Business Editor

Published: 9:34PM BST 15 Oct 2009

The bank – which has made more than $100bn (£61.5bn) of write-downs since the
financial crisis began – announced a pre-tax loss of $529m for the three
months to the end of September, after reporting a $5.3bn profit in the
second quarter.

The key driver of the tumble back into the red was fresh credit losses of $8bn
fuelled by losses in its US credit card and mortgage businesses, as well as
in parts of its corporate business.

"The bank is not making money, they are losing money in credit cards and
mortgages, and it's dragging down the entire bank," said analyst Bart
Narter at independent research house Celent.

Vikram Pandit, chief executive, said consumer credit was the number one issue
facing the bank. John Gerspach, the recently installed chief financial
officer, said the bank's view of the US credit market remains "somewhat
mixed."

Citigroup's core trading business, Citicorp, produced profits of $2.3bn on
revenues of $13bn. Its consumer business increased sales by 1pc compared
with the second quarter, and almost trebled profits to $615m, boosted by
customers in Europe and Asia.

Investment banking revenues came in at $4.9bn, against $6.9bn in the preceding
quarter, following a tightening of spreads of Citigroup's debt.

At the bottom line, on a post-tax basis, Citigroup managed to return a $102m
profit, but that was wiped out by the $3.2bn cost of the recent share
conversion that saw the US Treasury take a 34pc stake in the bank. As a
result, the bank reported losses of 27 cents a share - a net loss to
shareholders of $3.2bn.

The bank appears to be no closer to freeing itself from the grips of the US
government, which also owns $20bn of preferred shares and has provided a
$306bn loan-loss guarantee.

Mr Gerspach stressed "we have the capacity" to repay the funds, but
did not indicate when that might be.

The complex set of numbers confused analysts and investors alike, with
Greenwood Capital Management's Walter Todd admitting: "It can give you
brain damage trying to figure this out."

Citigroup shares fell 25 cents to $4.75, as investors questioned the bank's
results in light of positive performances elsewhere on Wall Street during
the third quarter.

This content has passed through fivefilters.org.