Business

<< Previous   of   Next >>   ADVERTISEMENT   CONTACT THE HERALD Mike Benbow, Business Editor benbow@heraldnet.com   Published: Friday, July 18, 2008 Citigroup posts $2.5 billion loss, but beats expectations By Madlen Read Associated Press NEW YORK -- Citigroup posted another loss and laid off 6,000 employees in the second quarter as it struggled with surging loan defaults, but the $2.5 billion shortfall was smaller than Wall Street anticipated. Citi's shares rose 5 percent in premarket trading today and helped boost the broader market, whose grim prognosis for the U.S. financial system this year sent stocks plummeting. The nation's biggest banking company by assets lost the equivalent of 54 cents per share in the April-June period. In the same timeframe last year, the bank earned $6.23 billion, or $1.24 per share. Analysts surveyed by Thomson Financial had predicted a larger loss of 66 cents share. Citigroup Inc.'s securities and banking division wrote down the value of its assets by $7.2 billion, before taxes, and an asset revaluation cost its consumer lending business $745 million. Those write-downs totaling about $8 billion are significantly lower than write-downs taken in the first quarter and in last year's fourth quarter. However, credit costs jumped to $7.2 billion as more consumers defaulted on their loans -- implying that while losses in the credit markets are decelerating, losses from actual defaults in Citigroup's mortgages, home-equity loans, auto loans and credit card lines are mounting. The $7.2 billion in credit costs included $4.4 billion in credit losses and a $2.5 billion charge to bulk up reserves for future loan losses. Citigroup has failed to turn a profit for three straight quarters, losing a cumulative $17.4 billion during that period after writing down its assets by about $46 billion. Its shares have tumbled 65 percent over the past year, and recently hit their lowest point since the day Citicorp and Travelers combined in October 1998. But after better-than-expected results from two other big consumer banks this week -- JPMorgan Chase & Co. and Wells Fargo & Co. -- the market appears to be deciding that the prospect for the ailing financial sector may not be as dire as they feared. Citigroup stock rose 90 cents, or 5.5 percent, to $17.34 in premarket trading. Citigroup's results were helped by asset sales, lowered expenses, and record revenues in transaction services, interest rate and currency trading and commodities. The bank has raised about $40 billion over the past several months by shedding businesses, lowering its dividend, and selling stock. And during the second quarter, Citi lopped off $99 billion from its total assets, which now stand at $2.02 trillion. Back in May, Chief Executive Vikram Pandit said the bank would shrink its then-$2.2 trillion in balance sheet assets by about $400 billion to $500 billion over the next few years. "While there is still much to do, we are encouraged by our progress in delivering on our commitment to the re-engineering efforts," Pandit said in a statement. Not all financial services companies have been clearing the low bar that Wall Street set for them this quarter. The brokerage Merrill Lynch & Co. late Thursday reported a wider-than-expected quarterly loss and write-downs from losing investments in the debt markets approaching $40 billion. The credit lender Capital One Financial Corp., meanwhile, posted a larger-than-expected profit decline.

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