Citigroup $2.5-billion quarterly loss lower than expected; shares rise

19 July 2008

Shares of Citigroup Inc. rose in New York trading after reporting a smaller-than-estimated loss on fewer mortgage-bond write-downs, lower borrowing costs and job cuts. The second-quarter net loss totalled $2.5 billion, or 54 cents per share, and compared with a last year profit of $6.23 billion, or $1.24 per share.

Revenue dropped 29 per cent to $18.7 billion, above analysts' estimates. The shares rose 9.1 per cent to $19.60 in pre-market trading as results were better than analysts' expectations of a $3 billion-plus loss. Citigroup has lost about $17.4 billion in the last three quarters and incurred more than $58 billion of write-downs and increased credit costs since the middle of 2007.

This report followed surprisingly strong profits this week from JPMorgan Chase & Co and Wells Fargo & Co, and a much larger-than-expected $4.9 billion quarterly loss at Merrill Lynch & Co.

Write-downs for sub-prime-related assets, leveraged loans and debt linked to bond insurers totaled $7.2 billion, down from about $12 billion in the first quarter and $18 billion in the fourth quarter of 2007.

Citigroup's investment bank lost $2.04 billion in the quarter, while consumer banking, the largest business, suffered a $700-million loss. Credit card profit declined 56 per cent to $467 million, and wealth management profit fell 21 per cent to $405 million.

The bank's costs for loan write-offs and higher credit reserves increased $4.5 billion from the second quarter of last year, mainly because of rising delinquencies in North America and the company's credit-card business.