Citigroup posts $2.5 bln loss on write-downs, smaller than expected

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Citigroup posts $2.5 bln loss on write-downs, smaller than expected
OluÅŸturulma Tarihi: Temmuz 19, 2008 12:00

Citigroup has become the latest big bank to quell Wall Street's worries about a financial sector implosion, posting a $2.5 billion second-quarter loss that was smaller than expected.

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News that Citi had suffered a net loss of $2.5 billion instead of the $3-4 billion forecast by Wall Street after writedowns of $7.2 billion and $4.5 billion in increased credit costs, sent its shares and the broader market on a relief rally.Â

 

Citi rose nearly 8 percent Friday and helped lift other financial stocks, having joined JPMorgan Chase and Wells Fargo in convincing investors that the prognosis for the sector, while gloomy, may not be as dire as the market feared.

 

"Like an alcoholic struggling to quit the bottle, Citigroup is taking life in the credit crunch one day at a time," the Financial Times commented on its weekend edition.

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Citi Chief Executive Officer Vikram Pandit, who succeeded onetime corporate lawyer Charles O. Prince at the New York-based bank in December, reduced assets by $99 billion during the quarter, making progress on the $400 billion he has targeted.

 

 

MORE RESULTS TO COME

Next week, Wachovia Corp. and Washington Mutual Inc. are anticipated to reveal losses, too, with Bank of America Corp. expected to report a steep profit decline.

 

"I don't think anyone's breathing too easily right now," Prakash Shimpi, who works in the risk management practice at Towers Perrin, said in a research note. Determining the dollar value of certain assets backed by debt is still a tricky process, he said, even a year after the crisis began.

 

Citigroup, like other banks, is bracing for mortgages and credit cards to bring more hefty losses. Default rates continued to rise on these loans, and Chief Financial Officer Gary Crittenden said that credit card loss rates could soon rise to their highest levels ever.

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"I think we have two to four quarters left," Crittenden said in an interview with the AP, referring to rising credit card losses. "Because of the mix of our business, it's possible that the peak will be higher than it was in the past." He said Citigroup's credit card exposure right now includes more risky, but higher-yielding, cardholders than in previous downturns.

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