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Citigroup is down! Citigroup’s biggest lost and possible bankruptcy.
NEW YORK — Citigroup said Tuesday it lost $7.58 billion during the final three months of 2009 as consumers still struggled to repay loans and the bank repaid its government bailout money.
Citigroup on Tuesday said $6.2 billion of the loss was tied to paying back $20 billion in money it received from the government.
The New York-based bank set aside $8.18 billion to cover soured loans during the quarter. However, in an encouraging sign, Citigroup’s provision for loan losses declined 10 percent from the previous quarter and 36 percent from the year-ago period when the credit crisis peaked.
Still, the bank’s chief financial officer, John Gerspach, said in a statement, “the environment continues to be challenging.” And the company noted in its news release that it had cut 100,000 jobs during the past year.
Citigroup was the bank hit hardest by the credit crisis and recession, receiving $45 billion in bailout money. It may turn out to have the poorest fourth-quarter showing among the big banks, as it lacks the big investment bank and trading operations that have helped other companies offset their losses from bad loans.
On Friday, JPMorgan Chase & Co. reported a $3.28 billion profit on the strength of its investment banking unit. JPMorgan said it set aside $7.28 billion for failed loans during the fourth quarter, nearly identical to the amount it reserved during the final quarter in 2008. It also warned that it didn’t know when it would be able to stop adding to its loan reserves.
Citigroup’s Gerspach did say the bank is seeing signs credit might be stabilizing or improving, especially in some of its international businesses.
The bank lost 33 cents per share during the quarter, in line with analysts expectations, according to Thomson Reuters.
J.P. Morgan’s bottom-line beat and top-line whiff — tied to lighter-than-expected bond trading revenue — got the financial sector’s earnings season off to a somewhat sloppy start last week. The next major bank to report is Citigroup, due before the open, that is, momentarily.
The consensus expectation of analysts polled by Thomson Reuters calls for a loss of 33 cents a share on revenue of $18.43 billion for the fourth quarter.
Back in October, Heard on the Street’s Peter Eavis pointed out a couple other things to keep an eye on when Citigroup coughs up its results. One is closely watched profit margin that measures interest income on a bank’s assets, after subtracting the bank’s own borrowing costs. In the third quarter, Citigroup’s fell to 2.93%, from 3.24% in the prior quarter and 3.15% a year earlier. This metric matters because it gauges the profitability of a bank’s core business of borrowing money and hopefully lending it out at higher interest rates.
Eavis also pointed out that during the third quarter, Citigroup did report strong growth in deposits, which are a cheap funding source. Interest-bearing deposits jumped $28 billion, or 4%, from the second quarter, and their cost fell to 1.3% from 1.73%.
Another area to keep an eye on will be Citigroup’s fixed-income revenue, which fell 18% to $4.7 billion in the third quarter from the second quarter, according to The Journal’s David Enrich. As we mentioned above, a slow down in fixed income trading at J.P. Morgan weighed on its results released last week, so it will be interesting to see how Citi fared.
