Citi weighed down by failed loans

Published: Friday | October 16, 2009

Citigroup provided a sobering reminder Thursday that the economy is still struggling, reporting that its third-quarter results were weighed down by billions of dollars in failed loans.

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.

Credit crisis

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.

- AP

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