WARTAWAN RASMI LAMAN REFORMASI: 01/23/08

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%.

CARLA K. JOHNSON, Associated Press Writer 27 minutes ago

CHICAGO - A new study gives the strongest evidence yet that obesity surgery can cure diabetes. Patients who had surgery to reduce the size of their stomachs were five times more likely to see their diabetes disappear over the next two years than were patients who had standard diabetes care, according to Australian researchers.

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Most of the surgery patients were able to stop taking diabetes drugs and achieve normal blood tests.

"It's the best therapy for diabetes that we have today, and it's very low risk," said the study's lead author, Dr. John Dixon of Monash University Medical School in Melbourne, Australia.

The patients had stomach band surgery, a procedure more common in Australia than in the United States, where gastric bypass surgery, or stomach stapling, predominates.

Gastric bypass is even more effective against diabetes, achieving remission in a matter of days or a month, said Dr. David Cummings, who wrote an accompanying editorial in the journal but was not involved in the study.

"We have traditionally considered diabetes to be a chronic, progressive disease," said Cummings of the University of Washington in Seattle. "But these operations really do represent a realistic hope for curing most patients."

Diabetes experts who read the study said surgery should be considered for some obese patients, but more research is needed to see how long results last and which patients benefit most. Surgery risks should be weighed against diabetes drug side effects and the long-term risks of diabetes itself, they said.

Experts generally agree that weight-loss surgery would never be appropriate for diabetics who are not obese, and current federal guidelines restrict the surgery to obese people.

The diabetes benefits of weight-loss surgery were known, but the Australian study in Wednesday's Journal of the American Medical Association is the first of its kind to compare diabetes in patients randomly assigned to surgery or standard care. Scientists consider randomized studies to yield the highest-quality evidence.

The study involved 55 patients, so experts will be looking for results of larger experiments under way.

"Few studies really qualify as being a landmark study. This one is," said Dr. Philip Schauer, who was not involved in the Australian research but leads a Cleveland Clinic study that is recruiting 150 obese people with diabetes to compare two types of surgery and standard medical care.

"This opens an entirely new way of thinking about diabetes."

Obesity is a major risk factor for diabetes, and researchers are furiously pursuing reasons for the link as rates for both climb. What's known is that excess fat can cause the body's normal response to insulin to go haywire. Researchers are investigating insulin-regulating hormones released by fat and the role of fatty acids in the blood.

In the Australian study, all the patients were obese and had been diagnosed with type 2 diabetes during the past two years. Their average age was 47. Half the patients underwent a type of surgery called laparoscopic gastric banding, where an adjustable silicone cuff is installed around the upper stomach, limiting how much a person can eat.

Both groups lost weight over two years; the surgery patients lost 46 pounds on average, while the standard-care patients lost an average of 3 pounds.

Blood tests showed diabetes remission in 22 of the 29 surgery patients after two years. In the standard-care group, only four of the 26 patients achieved that goal. The patients who lost the most weight were the most likely to eliminate their diabetes.

Both patient groups learned about low-fat, high-fiber diets and were encouraged to exercise. Both groups could meet with a health professional every six weeks for two years.

The death rate for stomach band surgery, which can cost $17,000 to $20,000, is about 1 in 1,000. There were only minor complications in the study. Stomach stapling has a 2 percent death rate and costs $20,000 to $30,000.

In the United States, surgeons perform more than 100,000 obesity surgeries each year.

The American Diabetes Association is interested in the findings. The group revises its recommendations each fall, taking new research into account.

"There is a growing body of evidence that bariatric surgery is an effective tool for managing diabetes," said Dr. John Buse of the University of North Carolina School of Medicine in Chapel Hill, the association's president for medicine and science.

"It's just a question of how effective is it, for what spectrum of patients, over what period of time and at what cost? Not all those questions have been answered yet."

Medical devices used in the study were provided by the manufacturers, but the companies had no say over the study's design or its findings, Dixon said.

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On the Net:

JAMA: http://jama.ama-assn.org