Citigroup Earnings Drop 57%, Beats Estimates

Number-one U.S. bank Citigroup said Monday its Q3 earnings dropped 57% due to substantial write-downs of bad loans, which had been previously announced, but its numbers came in stronger than analysts were expecting. Net income was $2.38 billion ($0.47/share), vs. $5.51 billion ($1.10/share) a year ago. Revenue was up slightly to $22.66 billion from $21.42 billion. Analysts polled by Reuters were expecting earnings of $0.43/share on $20.8 billion in revenue, on average. Citigroup told investors at the beginning of the month that its Q3 net income would fall about 60%. "This was a disappointing quarter, even in the context of the dislocations in the sub-prime mortgage and credit markets. A significant amount of our income decline was in our fixed income business, where we have a long track record of strong earnings, and this quarter's performance was well below our expectations," CEO Chuck Prince said (see earnings call transcript later today). The bank's results included a $1.35 billion writedown for leveraged loans, $1.56 billion for subprime mortgages, and a $636 million charge for fixed income trading, as well as a $729 million gain from its stake sale in Brazilian credit card transaction processor Redecard. Credit costs included a $780 million increase in net credit losses and a $2.24 billion charge to increase reserves for bad loans. While there has been pressure on CEO Prince to boost results, S&P analyst Frank Braden says investors must give him time: "We're a ways away from seeing any real pressure for his ouster... It'll take a couple more quarters of results like this before people say that maybe it's getting away from him, and it's more than just this crisis." PNC's Mark Batty agreed: "I don't think you could point the finger at Prince and say that it's his fault the credit markets froze up." Shares are up 1.3% to $48.51 in pre-market trading.

Sources: Reuters, MarketWatch
Commentary: Citigroup's CEO Chuck Prince Is Safe • Shakeup at Citigroup
Stocks to watch: C. Competitors: BAC, DB, JPM, HBC, WB

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Comments

[Moss:]

I don't know if I quite agree with the statement that CEO Chuck Prince should not take some responsibility for these losses. They happened on his watch and if he (and the other heads of banks for that matter) didn't see the credit crisis coming then they need to step down. Investing in loands for people with bad credit just sounds like a bad business plan. However, overall I feel that the rest of Citigroup's management seems up to the task of turning the company around www.newsvisual.com/new... . If we get similar numbers for Q4 and the first quarter 2008, maybe Citigroup should look at some serious changes.

2007 Oct 15 12:13 PM