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 Citigroup Inc. (NYSE:C) reported a profit of
$101 million for the third quarter and a 27 cent loss per share with third-quarter revenues at $20.4 billion. Predictions from analysts forecast the bank would lose 21 cents to 38 cents a
share on revenues of around $20.95 billion.The third-quarter results compared with a loss of $2.82 billion last year (see chart below). Citi was mostly weighed down this quarter by credit losses of $8.0 billion, which were probably impacted by rising unemployment and a $802 million net loan loss reserve. "They are being overly optimistic on the outlook for loan losses," Jon Fisher, a fund manager at Fifth Third Asset Management, told Bloomberg. "We are going to find out in a couple of quarters that they are way under-reserved and they are going to have to take a huge charge." Citi Holdings had a $1.9 billion quarterly loss due to credit card losses and consumer loans. The unit contains toxic assets that are up for sale. The divestitures impacted operating expenses, which were slightly down at $11.8 billion from $12.0 billion last quarter. Citi Holdings revenues were $6.7 billion versus $15.8 billion in the prior quarter, which was high due to the the sale of part of its stake in Smith Barney. Overall, revenue lost from the Smith Barney transaction since last quarter was about $10 billion (revenue was $20.4 billion, down from $30.0 billion). Excluding Smith Barney, Citi Holdings' loss from continuing operations was $1.8 billion, versus a loss of $5.3 billion in the prior quarter, showing that discontinuing some operations and divesting other nonprofitable businesses, such as Primerica Financial Services and Monex Group Inc., are positive steps. However, Citi has also been divesting some profitable businesses, which has concerned analysts. See assets up for sale in The Deal Pipeline (subscription required). You might have heard Citi was slimming down, but the bank actually grew in deposits: "Total assets were $1.9 trillion, up 2% from the prior quarter primarily reflecting growth in cash and due from banks, and deposits with banks, partially offset by declining loans and securities. Deposits were $833 billion, up $28 billion from the second quarter of 2009." This is notable because Citi is showing a strengthening deposit base, and with the government's 34% stake in it and being too big to fail it should be growing stronger. What will be interesting to see going forward is how its new retail banking strategy will affect its deposit base. The bank is expected to post a $1.74 billion net loss in the fourth quarter, according to Bloomberg. Citi CEO Vikram Pandit and CFO John Gerspach are hosting a conference call Thursday at 11:00 a.m. EST to discuss the earnings in more detail. - Maria Woehr 
CategoriesComments
From: Sean,
Primerica = non-profitable? 2008 net profits exceeded $500 million, and the company holds no debt. Sounds pretty fantastic to me.
Posted on:
October 16, 2009 2:39 PM
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Regarding loan loss reserves.
"They are being overly optimistic on the outlook for loan losses," Jon Fisher, a fund manager at Fifth Third Asset Management, told Bloomberg.
Does Bloomberg or the analyst want to comment on the umm *increase* in months of loss coverage. Maybe their reserve provisions are low because they had very generous reserves previously and have booked less losses than forecast. Why not use your expensive MBA and accounting designations for truth instead of just blurting out whatever comes to mind.