Citi Falls on Q3 Profit Warning

Citigroup warned early Monday it expects a "substantial decline" in Q3 net income, in the range of 60% year-over-year, due to "dislocations in the mortgage-backed securities and credit markets, and deterioration in the consumer credit environment." Citi shares were last down 2.4% to $45.55 in pre-market trading. Citi will writedown approximately $1.4B pre-tax (net of fees) on highly leveraged finance commitments, $1.3B pre-tax (net of hedges) on subprime mortgage-backed securities, and $600M pre-tax in fixed income credit trading. Citi said the write-downs were partially offset by lower expenses in Securities and Banking. Citi also reported an approximately $2.6B pre-tax increase in credit costs. In a statement, Citi called its expected Q3 results a "clear disappointment," but said its fixed income business "performed at more normalized levels" in September, and that the company regards Q3 as an "aberration." UBS AG said it will report a Q3 loss including more than $3.4B in write-downs, ahead of Citi's announcement on Monday. (See full story). Shares of Citigroup lost 0.45% to $46.67 on Friday.

Sources: Press release, Wall Street Journal
Commentary: UBS to Post Q3 Loss; Cut Jobs • Citigroup, Banks Could Face Hidden Risk -- WSJ • Dow 30 Price Targets
Stocks/ETFs to watch: C, UBS. Competitors: BAC, JPM, WM
Earnings call transcript: Citigroup Q2 2007
Related: Citi Oct. 1 Call Recorded Transcript [pdf]

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