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Losses Pile Up

By Reuters -  |  Posted 2008-04-18 Print this article Print

Citigroup is in a state of economic flux. 


Citigroup has lost close to $15 billion in the last two quarters, and has suffered more than $46 billion in write-downs and increased credit costs since the middle of 2007.

The bank has also slashed its dividend and raised more than $30 billion in capital. It ended March with a Tier-1 capital ratio of 7.7 percent, up from 7.12 percent at year-end, and above the 6 percent that regulators deem "well-capitalized." The ratio measures the ability to cover losses.

Book value per share, which measures assets minus liabilities, fell to $20.73 from $22.74 at year end. Return on equity was negative 18.6 percent in the quarter.

Write-downs in the latest quarter included $6 billion tied to subprime mortgages, $3.1 billion for loans to fund corporate buyouts, $1.5 billion for bond insurer exposure, $1.5 billion for auction-rate securities, $1 billion for below-prime "Alt-A" mortgages, and $600 million for commercial real estate.

The bank also incurred $3.1 billion of additional credit costs related to consumer lending.

"Results reflect the continuation of the unprecedented market and credit environment and its impact on our historical risk positions," Pandit said in a statement.

Another lender with heavy debt exposure, Merrill Lynch & Co (MER.N: Quote, Profile, Research), set more than $6.5 billion of write-downs Thursday.


Citigroup's investment bank suffered the brunt of the write-downs, and posted a $5.67 billion quarterly loss.

Profit dropped 45 percent to $1.43 billion at its largest business, the consumer unit, though revenue rose 16 percent.

U.S. consumer profit fell 84 percent to $279 million. Citigroup recently lured Terri Dial from Lloyds TSB Group Plc (LLOY.L: Quote, Profile, Research) to run the U.S. business. International consumer profit rose 33 percent.

Profit fell 33 percent to $299 million at Citigroup's wealth management business, including the Smith Barney brokerage and private bank. Alternative investments suffered a $509 million loss, hurt by write-downs and a hedge fund asset tied to Old Lane Partners LP, Pandit's former firm.

Pandit joined Citigroup in July, when the bank bought Old Lane. He became chief executive in December, replacing Charles Prince, who had resigned under pressure the previous month.

Citigroup ended the quarter with $2.2 trillion in assets.

Through Thursday, the bank's shares had fallen 18 percent this year, compared with a 9 percent drop in the Philadelphia KBW Bank Index .BKX. The stock's 52-week high is $55.53, set last May 23.

(Additional reporting by Jennifer Coogan and Michael Taylor; Editing by Lisa Von Ahn/Jeffrey Benkoe)

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