Tuesday, January 15, 2008

Citigroup Posts a $10B Q4 2007 Loss

A sign of the times. By the way, we are all in this boat together so cries for “let it fail” are not helpful. I am not condoning the decisions Citigroup made by a long shot. In my mind they failed at basic risk analysis. With that said this news will effect many people adversely, including everyone that is still in the stock market. Text in bold is my emphasis. From CNNMoney:

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

The financial giant also announced a bigger-than-expected writedown of $18.1 billion related to soured mortgage investments, a 41 percent cut to its dividend, and a $12.5 billion infusion from investors in Kuwait, Singapore and the state of New Jersey. . . . .

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

Citi's top line took a big hit. The company reported revenue of $7.2 billion for the quarter, down 70 percent from $23.8 billion a year earlier. . . .

. . . . Pandit, who arrived in office a little over a month ago, blamed the company's grim results on the mortgage-related writedown, subprime exposure in the company's fixed-income business and a surge in credit costs in its U.S. consumer loan portfolio.

Citi also announced major restructuring moves, including a reduction in the company's quarterly dividend from 54 cents to 32 cents a share, making it the latest financial institution to reduce its dividend payout.

The New York-based firm also said it raised $12.5 billion in capital from outside investors and would raise an additional $2 billion through the public sale of convertible preferred securities.

Citigroup also said it would continue to sell some of its non-core assets. Recently it trimmed its stake in the Brazilian credit card issuer Redecard SA.

"We are taking comprehensive action to position Citi for the future with the capital strength that will allow us to refocus on earnings and earnings growth," Pandit said in a statement.

"In an uncertain environment, these actions put us on our 'front foot,' focused on capturing opportunities that earn attractive returns for our shareholders," the statement said.

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, slashing its bloated payroll or cutting the company's dividend.

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 percent.

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