Citi Rallies Despite Writedowns, Job Cuts

Updated from 9:59 a.m. EDT

Citigroup (C Quote) posted a big first-quarter loss on billions of dollars more in writedowns and announced thousands of planned layoffs, but shares rose as the damage did not appear as bad as some feared.

The loss for the period was $5.1 billion, or $1.02 a share, including $12 billion in pretax writedowns and a $3.1 billion increase in credit costs in the global consumer business. Revenue dropped by half to $13 billion in the quarter.

Citi's results factored in $6 billion in writedowns on subprime-related securities, $3.1 billion on leveraged finance commitments, a downward credit value adjustment of $1.5 billion, writedowns of $1.5 billion on auction rate securities.

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CEO Vikram Pandit, in a company statement, said the "unprecedented market and credit environment" weighed on the company's earnings, but the bank sees "strong momentum throughout the organization."

"To start with, we're not happy with our financial results this quarter, although they're not completely unexpected given the assets we hold," Pandit later said on the conference call. "Through all of this, even as we expect economic news to be challenging, my confidence in this company's abilities and our future is extremely high," he said later.

On average, analysts surveyed by Thomson Financial were looking for a loss of 95 cents a share, meaning Citi was worse than expected. However, the top line exceeded estimates of $12.77 billion.

The bank, on the conference call, also said it was cutting another 9,000 jobs. Still, shares of Citi recently were popping 7.5% to $25.83, as investors' worst fears were side-stepped by the firm, analysts say.

Pandit is aggressively repositioning the company to include greater efficiency amid a troubled economic environment. Pandit, who took over as CEO after Charles Prince's departure from the firm late last year, is attempting to gain a handle on what many consider an unwieldy super-financial services conglomerate.

At the end of last month, Citi formally announced a new corporate organizational structure in which its business lines will be combined and arranged by geographic location. The company is also splitting its consumer banking and credit card divisions into two separate units, among other things.

The bank said Friday it would cut 9,000 jobs, including 7,000 in its consumer business, bringing its total identified workforce eliminations to roughly 30,000. Last quarter, Citi identified 4,200 jobs for elimination, mostly in investment banking, in addition to the 17,000 identified a year earlier by Prince.

Citi took repositioning charges of $622 million in the quarter.

CFO Gary Crittenden, in response to a question posed by Oppenheimer analyst Meredith Whitney, said that operating leverage -- the process in which revenue grows faster than expenses -- will be a difficult measurement as the company moves forward with its restructuring.

"We're in the active process of divesting businesses, and that's a lumpy process almost by definition," Crittenden said on the call. "There's no assurance that the amount of marks we've taken in this quarter are finished. We're three quarters into this; I think we have substantially reduced our amount of risk, but there is always the prospect that you could have additional marks, and that throws the calculation of that number pretty much out the window.

"What I would say is I think you should hold us accountable for a couple of things -- that we make significant progress on head count and that we make significant process that is discernible in our numbers on expenses," he added. "Those are things that you should be able to see if we're dong a good job on re-engineering. I think for now that's going to have to be the best way to think about our progress on expense management."