Citi loses $8.3 billion, separates into two units
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Citigroup Inc unveiled a plan to break into two businesses as a way to shed troubled assets, and reported an $8.29 billion fourth-quarter loss, its fifth straight quarterly loss.
The company also said on Friday that it anticipated more departures from its board, which is losing Robert Rubin as a director later this year. Nevertheless, Citigroup shares rose 14.9 percent to $4.40 in premarket trading, in part because of hope about the bank's plans to restructure and separate its good assets from its bad ones.
"It's one of the first steps toward some positive news and the end of this nightmare," said Michael Holland, founder of Holland & Co in New York, which oversees more than $4 billion of assets.
Citigroup posted $28.3 billion of writedowns and credit losses, bringing its total credit losses over 15 months to more than $92 billion.
The bank's fourth-quarter loss equaled $8.29 billion, or $1.72 per share, compared with a year-earlier loss of $9.8 billion, or $1.99 a share.
The results included after-tax gains of $3.9 billion from the sale of the company's German retail banking operations.
Citigroup is splitting into two operating units, one of which will focus on universal banking, the other on brokerage and retail asset management, local consumer finance, and a pool of assets that require special management.
Anticipated for some time, this step is seen as a "good bank/bad bank" plan. The good assets will be in the universal bank known as Citicorp, while the troubled assets will be in the unit known as Citi Holdings.
The bank is considering selling off Citi Holdings assets, or letting them mature on their own.
Good bank/bad bank plans have worked in the past, Holland said.
In the fourth quarter, revenue fell 13 percent to $5.6 billion, reflecting weak capital markets. The company's global credit card business saw revenue decline 27 percent on weakness in North America.
Consumer banking revenues declined 22 percent, driven by a 47 percent drop in investment sales. And its institutional clients group, securities and banking revenues were negative $10.6 billion, mainly due to net losses and write-downs of $7.8 billion.
"Our results continued to be depressed by an unprecedented dislocation in capital markets and a weak economy," Chief Executive Vikram Pandit said.
Said Matt McCormick, portfolio manager at Bahl & Gaynor Investment Counsel in Cincinnati: "I think people knew it was going to be bad, but I'm surprised it's this bad."