Citi weighed down by failed loans
Published: Friday | October 16, 2009
The bank reported a US$101 million profit before accounting for US$288 million in preferred stock dividends and the debt exchange offer that gave the government a 34 per cent stake in the bank.
Including those items, the New York-based bank reported a US$3.24 billion loss.
Investors reacted negatively to the bank's report of continuing heavy loan losses, and sent Citigroup shares down 17 cents, or 3.4 per cent, to US$4.83 in premarket trading. Shares closed Wednesday at US$5.
The bank, one of the hardest hit during the credit crisis and recession, said loan losses during the quarter came to US$8 billion, down US$386 million from nearly US$8.4 billion in the second quarter, but a sign that many consumers continue to be overwhelmed.
Banks, including Citigroup, had warned when second-quarter earnings were released that loan losses would continue into next year.
Citigroup said it added US$800 million to its loan loss reserves during the third quarter, down US$3.1 billion from the addition it made during the second quarter.
The debt exchange offer completed during the quarter gave Citigroup a better mix of capital to withstand additional loan losses and further weakening in the economy.
The company took an accounting charge of $3.06 billion as a result of the exchange, contributing to the majority of its third-quarter loss.