Citigroup shares spike after $2.5B loss

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Stock prices are delayed 15 minutes. Source: Globe and Mail.

Citigroup Inc., the largest U.S. bank, Friday posted a smaller-than-expected, quarterly loss, despite some $11.7 billion US of writedowns and credit losses tied to deteriorating capital markets and the slumping economy.

The second-quarter net loss totalled $2.5 billion, or 54 cents per share, and compared with a year-earlier profit of $6.23 billion, or $1.24 per share.

Citigroup's loss from continuing operations was $2.22 billion, or 49 cents per share, while revenue declined 29 per cent to $18.65 billion.

Analysts on average had expected a loss of 67 cents per share on revenue of $17.44 billion, according to Reuters Estimates.

Chief executive Vikram Pandit is trying to focus on stronger businesses and slash risky assets after years of poor expense and risk management left the New York-based bank bearing the brunt of the global credit crisis.

"Pandit seems to be doing the right things and is starting to build a base," said Jonathan Monk, senior portfolio manager at Aerion Fund Management in London.

U.S. equity index futures – which had been lower following a spate of earnings disappointments late Thursday from Google Inc., Merrill Lynch & Co and Microsoft Corp. – turned positive, and the U.S. dollar strengthened. U.S. Treasury debt prices fell, pushing the yield on the benchmark 10-year U.S. Treasury note back over four per cent.

Citigroup has lost about $17.4 billion in the last three quarters and incurred more than $58 billion of writedowns and increased credit costs since the middle of 2007.

Citigroup's securities and banking unit took $7.2 billion of writedowns. This included $3.5 billion tied to subprime mortgages and $2.4 billion related to bond insurers, and smaller losses tied to commercial real estate, leveraged finance and "Alt-A" mortgages.

The bank said it also increased credit costs by $4.5 billion, largely tied to U.S. consumer banking operations and its worldwide credit card business.

Citigroup said it eliminated 6,000 jobs during the quarter, and about 11,000 in the first half of the year. It aims to keep cutting jobs at a similar rate, as it tries to eliminate $15-billion of its costs within two to three years.

"While there is still much to do, we are encouraged by our progress," Mr. Pandit said in a statement.

Earlier this month, Mr. Pandit agreed to sell Citigroup's German consumer banking business to France's Credit Mutuel Group for roughly $8 billion. He has said he expects to offload $400 billion of assets.

The bank has cut its dividend and raised more than $40 billion of capital, helping to boost its Tier-1 capital ratio to about 8.7 per cent from 7.12 per cent at year-end.

That ratio measures the ability to cover losses. Regulators say six per cent reflects a "well capitalized" bank.

Through Thursday, Citigroup shares had fallen 39 percent this year, compared with a 30-percent drop in the KBW Bank Index.

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