In a reversal of the first three quarters of 2009, Citigroup Inc (C) reported a fourth-quarter loss of $7.58 billion, meeting analyst recommendations.
The loss, a marked contrast from the $175 million in earnings that Citi reported in the third quarter, was highlighted by $6.2 billion in items related to its repayment of government aid.
The $7.6 billion loss amounted to 33 cents a share, compared to a loss of $17.24 billion, or $3.40 a share, in the year-ago quarter.
The bank is working to reduce the government shadow (the Treasury Department still owns more than one-fourth of Citi’s common stock) and sell off its peripheral businesses. Since being bailed out, Citigroup has managed to shed nearly $100 billion in assets in the last 12 months
As the bank focuses on its core of investment banking and global consumer and business banking, the numbers still show a bank that is struggling from a massive portfolio of bad consumer loans as well as some of the exotic securities that were at the heart of the credit crunch.
However, despite not turning a profit in the quarter, Citi did deliver something that J.P. Morgan Chase & Co. did not: an improvement in losses from consumer loans in the United States, Asia, and Latin America.
Loan-loss provisions were $8.2 billion, down 36% from the prior year and 10% from the prior quarter. Net credit losses fell to $7.1 billion sequentially from $7.9 billion.
Citigroup’s Chief Financial Officer John Gerspach in the company’s fourth-quarter earnings release Tuesday said that although it remains “cautious and continues to monitor the future impacts of our current loss mitigation efforts, we continue to see indications that credit may be stabilizing or improving, particularly in Asia and Latin America.”
The CFO said the company made “significant progress” in 2009. “While the environment continues to be challenging, we have a strong capital base and client franchise,” he said.
Revenue dropped 4.3% to $5.41 billion. Net income in all of Citi’s core business lines fell from the third quarter, although some improved from a year earlier. In the lines of business that Citi wants to run down or sell, the loss widened.
Mr. Gerspach said the bank is seeing “continuing stabilization” in most of its loans to corporations. He also said the performance of consumer loans would depend almost entirely on the condition of the U.S. economy going forward.
“Provisions and charge-offs were lower than we expected, suggesting that Citi’s outlook for its loan book has improved, particularly in corporate and international portfolios,” Standard & Poor’s analysts said in report to clients on Tuesday.
“We think the pace of reserve building will continue to slow, allowing for an earnings improvement in 2010, the analysts concluded.
They raised their Citi earnings estimate 2010 by 7 cents, to breakeven, but kept its target price at $4.50, which it called, “a premium to projected tangible book value, but a discounted multiple to peers.
In pre-market trading, Citi shares fell 1.8% to $3.36.
