Citigroup suffers US$9.8 billion loss


Posted by Raja Petra

Saturday, 19 January 2008

Financial giant takes US$18.1 billion writedown and slashes dividend

Citigroup Inc. delivered some of the worst quarterly results in its history on Tuesday, reporting a nearly US$10 billion loss that was much worse than Wall Street had anticipated.

The financial giant also announced a writedown of US$18.1 billion related to soured mortgage investments and a 41% cut to its dividend. At the same time, it said it was receiving a US$12.5 billion infusion from investors in Kuwait, Singapore and the state of New Jersey.

Citigroup shares gained 1.5% in pre-market trading on the news.

The company recorded a net loss of US$9.83 billion, or US$1.99 a share, in the fourth quarter. In the same period last year, the company reported a profit of US$5.13 billion, or US$1.03 per share.

Tuesday's results mark Citigroup's first quarterly loss since the merger of Citicorp and Travelers Group in 1998. Citi's top line took a big hit. The company reported revenue of US$7.2 billion for the quarter, down 70% from a year earlier.

The results were far worse than forecast although analysts had expected the company to report a loss, according to analysts surveyed by earnings tracker Thomson Financial.

“Our financial results this quarter are clearly unacceptable," said Citigroup CEO Vikram Pandit, who arrived in office a little over a month ago and blamed the company's grim results on subprime exposure in the company's fixed-income business, a surge in credit costs in its US consumer loan portfolio and the staggering writedown.

Big changes announced

Citi announced major restructuring moves Tuesday, including a reduction in the company's quarterly dividend, making it the latest financial institution to reduce its dividend payout. A cut in the dividend is often viewed as a sign that a firm is in financial trouble.

There had been intense speculation recently that the company would take Tuesday's earnings as an opportunity to unveil major restructuring initiatives, including selling some non-critical assets or cutting the company's dividend.

Citigroup, however, did not announce any major job cuts. There had been intense speculation that the company could announce major cuts to its workforce of more than 300,000, on top of the 17,000 workers it said it would eliminate from its payroll last spring.

Citigroup's stock endured one of its worst annual performances on record last year and was the worst performing Dow component in 2007. Its shares finished the year down 47%.


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