US banking major Citigroup has announced plans to split up operations into two businesses following a fourth-quarter net loss of $8.29 billion, its fifth straight quarterly loss.
For the full year 2008, Citigroup reported a net loss of $18.72 billion, or $3.88 per share. Net loss from continuing operations rose to $12.14 billion. Results also include $6.1 billion in net credit losses and a $6.0 billion net loan loss reserve build.
Citigroup is reorganising its business into Citicorp, which will focus on traditional banking around the world and Citi Holdings, which will hold the company's riskier assets, CEO Vikram Pandit said while announcing the results.
Pandit said Citi's fourth quarter revenues were $5.6 billion, down 13 per cent. Revenues across all businesses reflect the impact of a difficult economic environment and weak capital markets.
Global Cards GAAP revenues declined 27 per cent, mainly due to lower securitisation results in North America.
Average managed loans declined 2 per cent, due to lower purchase sales in North America and the impact of foreign exchange. North America managed revenues increased 4 per cent.
Consumer banking revenues declined 22 per cent, driven by a 47 per cent decline in investment sales, lower mortgage servicing revenue, the impact of foreign exchange, lower volumes and spread compression.
"Today, we announced that we would separate the company, for management purposes, into two separate businesses - Citicorp and Citi Holdings. We are setting out a clear roadmap to restore profitability and enable us to focus on maximizing the value of Citi and strengthening TCE,'' said Pandit.
"We are committed to helping the financial markets recover as quickly as possible. To accelerate that recovery Citi is putting the TARP capital it has received to work to support the U.S. economy and consumers - expanding the flow of credit to U.S. households and businesses responsibly and on competitive terms,'' he added.
Pandit said Citi's results were impacted by $7.8 billion in revenue marks in securities and banking, a $5.3 billion downward credit value adjustment on derivative positions, excluding monolines, $2.5 billion of losses in private equity and equity investments, $2.0 billion of restructuring costs, and a $6.0 billion net loan loss reserve build.
Deposit base remained stable compared to the third quarter 2008 despite the challenging environment while net interest margin increased 73 basis points versus the fourth quarter 2007, he said.
Expenses excluding restructuring and repositioning charges were down 4 per cent since the third quarter 2008 and 14 per cent since the fourth quarter 2007.
City shed approximately 29,000 staff since the third quarter 2008 and approximately 52,000 in the full year 2008.
Citi increased capital position by issuing $45 billion of preferred stock and warrants to the US Treasury as part of the TARP. The Tier 1 capital ratio was approximately 11.8 per cent.
Closed sales of the German retail banking operations and Citi Global Services Limited for after-tax gains of $3.9 billion and $192 million, respectively.
Pandit said the loss sharing programme with the US government, which closed on 15 January, reduces risk and lowers the regulatory capital requirement on $301 billion of covered assets. Additionally, Citi closed on the issuance of $7.1 billion of liquidation preference perpetual preferred stock and warrants to the US Treasury and FDIC.
''Our legacy assets declined to approximately $300 billion, over $300 billion of assets are now covered by a loss sharing arrangement, and we added $14 billion to our loan loss reserves. We expect reduced volatility from marks in 2009 as a result of actions we've taken to reduce risk, and reclassify certain securities and loans from trading and available or hold for sale to hold to maturity or held for investment,'' he said.
Citi, which announced the Morgan Stanley Smith Barney joint venture on 13 January, said it will exchange Smith Barney for a 49 per cent stake in the JV and a $2.7 billion cash payment. The transaction is expected to result in a pre-tax gain of approximately $9.5 billion (approximately $5.8 billion after-tax).
"Our results continued to be depressed by an unprecedented dislocation in capital markets and a weak economy. However, a number of our core customer franchises continued to perform well as Citi's customers remain active and engaged with us,'' he said.
Citi has some 200 million customer accounts and does business in more than 100 countries, providing consumers, corporations, governments and institutions with a broad range of financial products and services, including consumer banking and credit, corporate and investment banking, securities brokerage, and wealth management.