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Citigroup bleeds in 4Q but trims full-year losses

Published:Wednesday | January 20, 2010 | 12:00 AM

Citigroup Inc became the latest bank to take a cautious view of consumers' credit problems, reporting a US$7.77 billion fourth-quarter loss due to failed loans and the costs of repaying government bail-out money.

The bank said Tuesday it did see some early signs of improvement in its credit business, although it still needed to set aside US$8.18 billion to cover unpaid loans. That amount was down 10 per cent from the third quarter, and 36 per cent from a year earlier.

For the full year, Citigroup lost US$1.61 billion, or 80 cents per share, compared to US$27.68 billion, or US$5.61 per share in 2008.

John Gerspach, Citigroup's chief financial officer, reported one of those improving signs during a conference-call with the media, noting that the number of mortgage and credit card loans that were newly delinquent, or between one and three months past due, had started to stabilise and even drop in some of its lending portfolios.

However, Gerspach said "the US credit story is still very much developing".

His comments were similar to those made by JPMorgan Chase & Co when it reported Friday that it earned US$3.28 billion during the fourth quarter, thanks to its strong investment banking unit.

Billions for failed loans

JPMorgan said it set aside US$7.28 billion for failed loans during the fourth quarter, nearly identical to the amount it reserved for bad loans during the final quarter in 2008. It also warned that it did not know when it would be able to stop adding to its loan reserves.

2009 was a year of drastic change at Citigroup, the big bank hit hardest by the credit crisis and recession. It may turn out to have the poorest fourth-quarter showing among the big banks, as it lacks the big investment bank and trading operations that have helped other companies like JPMorgan Chase offset their losses from bad loans.

The bank, which received US$45 billion in government bail-out money, repaid US$20 billion during the fourth quarter and raised an equal amount of capital to fund the repayment.

It shed 100,000 jobs during the year and completed 14 asset sales, including the Smith Barney brokerage and Japanese units Nikko Cordial Securities and Nikko Asset Management.

The bank's loss after accounting for payment of preferred dividends came to almost US$7.77 billion, or 33 cents per share. That compared with a loss of US$18.16 billion, or $3.40 a share, a year earlier. In the third quarter of 2009, it earned US$101 million.

The latest results were in line with analysts' expectations, according to Thomson Reuters.

Clearest indication

The bank's stock rose two cents to US$3.44 in morning trading. The stock price is perhaps the clearest indication of how far Citigroup fell during the banking crisis and recession. At the stock market's peak in October 2007, it traded at US$45 a share.

Citigroup lost six cents per share excluding the charges tied to repaying government bail-out money, recording after-tax loss of US$6.2 billion for expenses related to the bail-out repayment.

The government has converted the remaining US$25 billion of the bail-out money it gave Citigroup into a 34 per cent stake in the bank, which it plans to sell during the next year.

Investors have remained skittish about the health of Citigroup, most notably last month when Citigroup sold new shares at US$3.15 per unit to repay the government, well below what the bank and government were expecting.