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Citigroup reports first-quarter loss of $966M

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Published April 17, 2009 at 9:29 AM
bankwatch.gifCitigroup Inc. (NYSE: C) beat analysts expectations as reported net income for the first quarter of 2009 hit $1.6 billion resulting in a loss per share of $0.18 or $966 million; well below the $5.19 billion loss a year earlier. Analysts had been predicting a loss of 32 cents. Citigroup reported revenues of $24.8 billion.

CEO Vikram Pandit wasn't on the conference call, but CFO Ned Kelly cautioned not to read too much into that. Citigroup also announced the bank would delay the conversion of as much as $52.5 billion in preferred shares until after the U.S. government completes its stress test on the banks on May 4.

Here are some highlights from the press release:

  • $7.3 billion in net credit losses and a $2.7 billion net loan loss reserve build
  • Total revenues of $24.8 billion were up 99% compared to the first quarter of 2008, with sequential improvement across all regions.
  • Net interest margin of 3.30% increased 50 and 8 basis points versus the first and fourth quarter 2008, respectively.
  • Operating expenses were down $3.7 billion, or 23%, since the first quarter 2008.
  • Headcount reduced by approximately 13,000 since the fourth quarter 2008 to 309,000 and approximately 65,000 since peak levels.
  • Tier 1 capital ratio was approximately 11.8% versus 7.7% in the first quarter 2008.
  • Deposit base remained relatively stable at $763 billion compared to the fourth quarter 2008, despite the challenging environment. Deposits declined 8% since the first quarter 2008, due to the sale of the German retail banking operations and the impact of foreign exchange. U.S. deposits increased $8 billion sequentially and $28 billion year-over-year.
  • Closed sale of remaining Redecard position for an after-tax gain of $704 million.
  • Completed 27 divestitures in order to deleverage
  • Institutional Clients Group, Securities and Banking revenues were $7.2 billion, mainly due to strong trading results, partially offset by net write-downs and losses of $2.2 billion
  • Transaction Services revenues declined 1% to $2.3 billion, and average deposits and other customer liability balances declined 2%.
  • Consumer banking: credit costs of $5.0 billion included $3.8 billion of net credit losses and a $1.2 billion net loan loss reserve build, mainly in North America residential real estate.
  • Citigroup has cut 13,000 of 52,000 jobs so far

Another important item in the press release is the accounting rules that Citi adopted, which Dealscape pointed out might've helped Citigroup:

"Citi adopted FASB's recent rule changes regarding fair valuation (FAS 157) and other than temporary impairments (FAS 115). The adoption of the changes to FAS 157 had no impact on Citi's financial results. The adoption of the changes to FAS 115 resulted in approximately $631 million pre-tax of lower impairment charges recorded in revenue in the current quarter. Additionally, the cumulative effect of the changes to FAS 115, which did not impact revenues, led to a $413 million after-tax increase in retained earnings and an offset in other comprehensive income on the balance sheet."

In fact these accounting rules did help Citigroup. As Blogging Stocks points out:

"I could not believe my eyes when I read it but it turns out that Citi was able to take a $2.5 billion gain on a rule that lets it record any declines in the market value of its debt as an unrealized gain. The rule, which Citi adopted in 2007, reflects the possibility that a company could buy back its own debt at a discount, which under traditional accounting methods would result in a profit. But Citi didn't do that -- this has to be some kind of an error...And there should be a rule that forces Citi to take a loss for a decline in the market value of its assets too. But thanks to FAS 157-e, it can record any gain it wants on the value of its toxic waste -- and I would not be surprised if Citi did just that in the first quarter.

Ned Kelly was also questioned by an analyst about the assets transferred from mark-to-market Kelly said that the bank moved $29 billion, and wrote up $540 million on the value.- Maria Woehr

Also see:
J.P. Morgan: revenue of $26.9B; plans to repay TARP
Is Goldman's rush to repay TARP premature?
Banks' first-quarter results preview
Citigroup earnings preview

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