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Citigroup earnings review
Citigroup expected a somewhat larger than expected loss this morning. The total loss for the first quarter was $5.1 billion or $1.02 a share on revenue of $13.2 billion. Analysts had expected a loss of $.95. The chief culprit for the loss was over $15 billon in write downs related to mortgage and security positions held by the bank. The largest loss was $6.1 billion related to subprime securities, followed by $3.1 billion of losses in the leveraged loan portfolio. This brings total write downs for Citigroup related to the credit crisis to almost 440 billion. To date the bank has had to raise over 430 billion from asset sales and equity raising form Sovereign Wealth Funds. The bank continued to have to add to its loan loss reserves as credit losses continue in the United States as well as globally. Losses in the US credit card division were up 235 in the quarter. In a sign of potential good news for Citigroup, revenue growth was strong across most operating divisions. Global consumer revenue was up 16%, driven by a 33% increase in international revenues, while global wealth management revenues rose 16%.
What does this mean for Citigroup going forward?
After the announcement the credit rating agencies reacted with either ratings reductions or negative comments. In their release putting the company on watch with negative implications Standard and Poors commented ""Citigroup's announced loss of $5.1 billion for the first quarter reflects not only further marks to market of securities, but large additions to reserves in anticipation of further deterioration in its loan portfolio "If we determine that the potential for earnings volatility and further depletion of the common equity component is not consistent with the 'AA' rating category, we could lower the rating by one notch." Fitch credit Agency lowered its rating on Citigroup saying in their report, ""The potential depth of problems across Citigroup's U.S. consumer portfolio will likely make a restoration of desirable financial metrics a 2009 event at the earliest," Fitch said in a statement. "This comes on top of financial challenges in Citigroup's securities and banking operations in both the near and intermediate terms as Citigroup looks to reduce problematic exposures, right size this business and focus activity on customer value-added transactions."
Bank officials also said they would be cutting an additional 9000 jobs. This brings the total job loss to 13200 for Citigroup in the last six months. This is part of the ongoing moves to cut costs. CEO Vikram Pandit has said he intends to cut total costs by at least 20%. These moves will probably include even more job losses in the months ahead. Some analysts have predicted the total job loss for the company could eventually exceed 20,000 jobs. .In a statement released this morning Mr. Pandit said, "We are taking the necessary steps to make Citi more efficient while fostering a culture of accountability and teamwork," As we move into the second quarter and beyond, we will continue to divest non-strategic assets and allocate capital to the products and regions that will drive increased revenues, enhance the value of our franchise, and ultimately, maximize shareholder value."
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