Citigroup Loss Matches Wall Street View - TheStreet

Citigroup Loss Matches Wall Street View

Citigroup shares were rebounding after the company reported an in-line loss for the fourth quarter, but said total credit costs for the period were its lowest since just prior to the financial crisis.
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Updated with latest share prices, Pandit comment from conference call




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shares were moving higher in early afternoon action after the company posted an in-line loss for the fourth quarter, but showed some progress in bringing down credit costs.

The stock was gaining 13 cents, or 3.7%, to $3.55 in recent trades. Volume was more than 578 million, good for tops on the New York Exchange and well above the issue's trailing three-month daily average of 491.4 million. The shares initially traded lower to start the session, falling as far $3.30, before rebounding.

Before the opening bell, the company reported a fourth-quarter loss of $7.6 billion, or 33 cents a share, matching Wall Street's consensus estimate for the period. Excluding a $6.2 billion after-tax loss associated with repayment of bailout funds and the exit of a loss-sharing agreement with the federal government, Citigroup lost $1.4 billion, or 6 cents a share, in the December period.

While the red ink continued to spill, Citigroup said total credit costs were at their lowest level since the second quarter of fiscal 2008, which is the period before the financial crisis came to a boil with the bankruptcy filing of

Lehman Brothers


Fourth-quarter revenue came in at $5.4 billion. Excluding a $10.1 billion pre-tax loss associated with the TARP repayment and exiting the loss-sharing agreement, revenue was $15.5 billion. On a managed basis, excluding these items, revenue was $17.9 billion.

The average analysts' view was for a loss of 33 cents a share on revenue of $18.4 billion in the three months ended in December.

"We have made enormous progress in 2009," said CEO Vikram Pandit. "It was our responsibility to get our own house in order. We greatly improved Citi's capital strength, reduced the size and scope of the company, and refocused our business strategy to take advantage of our unmatched global network."

"In the near term, we will continue to focus on sustainable profitability and growth, and supporting the global economic recovery," Pandit added. "I believe we are positioned for long-term success, and have a strategy that combines our international footprint, global talent and unique capabilities to serve our clients and customers here and around the world.

Pandit elaborated on the company's outlook during the conference call.

"We enter 2010 with a strong foundation for the future with a strong franchise and powerful operating franchise for Citigroup," which includes being "relentlessly focused" on expenses and reinvesting in Citicorp as well as its U.S. regional consumer business, Pandit said on the call.

U.S. consumer credit, in particular U.S. mortgage exposure, is the "key remaining issue," for Citigroup, he added. The company completed more than 130,000 mortgage loan modifications in 2009, and established another 119,000 trial modifications during the year under its own program and the government's HAMP effort.

Citigroup recorded a provision for loan losses of $8.2 billion in the final quarter of 2009, which included $7.1 billion in net credit losses - the second consecutive quarter of improvement -- as well as a $700 million additional reserve build. The total provision was down 36% from the same period a year earlier and 10% from the third quarter.

Citigroup's allowance for loan losses stood at $36 billion at Dec. 31, or 6.1% of total loans. The consumer portion of that allowance totaled $28.4 billion.

At Dec. 31, Citigroup's Tier 1 capital ratio was 11.7%, while Tier 1 Common ratio was 9.6%.

Total income from Citicorp, the company's so-called good bank and core businesses, fell 26% to $1.7 billion because of lower revenue in its Securities and Banking operations as well as higher operating expenses. Citicorp's revenue rose 9.3% from the prior year's quarter but fell 10.5% from the third quarter to $11.6 billion.

Fourth-quarter revenue in Citigroup's Securities and Banking operations declined sequentially 29% to $3.45 billion. The results included negative credit value adjustments of $1.9 billion.

As expected, Citigroup had solid results from its advisory and equity underwriting businesses, but fixed income markets revenue of $1.8 billion dropped by more than 50% as compared to the third quarter. The weaker trading results were driven by "lower market volatility

which led to a reduction in trading opportunities," Citigroup said in the release.

Analysts had predicted that weaker fixed income trading would take a bit out of revenue for the big banks.

JPMorgan Chase (JPM) - Get Report

, while reporting overall solid fourth quarter profit and revenue figures, said that the weaker results from the fixed income business were because of "lower overall volumes and tighter spreads across products."

Revenue from Citigroup's regional consumer banking operations rose slightly from prior comparable quarters to $5.7 billion. The company said that deposits within its regional consumer banking operations rose $31 billion, or 12%, last year. Still managed revenue for the business fell 6% to $29 billion, reflecting a decrease in average assets and the continuing high credit costs.

The other two large money-center banks,

Bank of America

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Wells Fargo

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report on Wednesday. Shares of those companies followed a similar pattern to Citigroup's stock and were rising 0.9% and 1.03% respectively.


Written by Laurie Kulikowski in New York