Citigroup Inc in hot water as they post a $2.5 Billion Loss

Citigroup Inc., the biggest U.S. bank by assets, reported its third straight quarterly loss after at least US$7-billion of credit-market writedowns.

The second-quarter net loss of US$2.5-billion, or 54 cents a share, compared with earnings of US$6.23-billion, or US$1.24, a year earlier, the New York-based company said on Friday in a statement. Analysts estimated the loss would be US$3.67-billion, according to a Bloomberg survey.

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Citigroup's report follows surprisingly strong profits from JPMorgan Chase & Co. and Wells Fargo & Co., and disappointing results from Merrill Lynch & Co. Citigroup chief executive Vikram Pandit, who took over in December, has raised US$44-billion of capital and outlined plans to reduce assets by US$400-billion over the next two to three years.

"The worst news is out," said Malcolm Polley, chief investment officer of Milwaukee-based Stewart Capital Advisors LLC, which manages more than a US$1-billion, including Citigroup shares. "I don't think it's going to get worse. It may not get better for a while."

Citigroup slumped 39% in New York trading this year, reaching the lowest point since the bank was created a decade ago from the merger of Citicorp and Travelers Group Inc. The decline led to the ouster of former CEO Charles Prince as credit-market losses piled up and Citigroup's market value fell below those of Bank of America Corp. and JPMorgan. New York-based JPMorgan on Thursday reported second-quarter earnings of US$2-billion. Wells Fargo's profit was US$1.75-billion.

Writedown Expectations

"We will continue to have substantial additional marks on our subprime exposure this quarter," chief financial officer Gary Crittenden said on a conference call last month.

Citigroup also wrote down the value of so-called monoline insurance companies including Ambac Financial Group Inc. after they were stripped of their AAA credit ratings.

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"All of the over US$300-billion in capital raises worldwide have plugged holes," Oppenheimer & Co. analyst Meredith Whitney said in a Bloomberg Television interview earlier this week. "They haven't funded new equity growth. You plug these holes and you are still in the same situation where you started off."

The bank slashed the quarterly dividend by 41% in January to 32 cents a share, the first drop since the early 1990s. Analysts including Ms. Whitney have said the bank may have to cut the dividend again to bolster capital as losses escalate.

Mr. Pandit said in May that Citigroup will shed "legacy assets," including real estate holdings and collateralized debt obligations, such as bonds backed by pools of subprime mortgages.

Citigroup also plans to cut US$15-billion in costs in the next two to three years, while aiming for revenue growth of 9%, Mr. Pandit said.

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The bank said in January it would eliminate about 4,000 jobs in the securities division, and said two months later that the number had increased by about 2,000. Citigroup said in April it would slash 7,000 jobs outside the investment banking group over the next year, and executives have said further reductions are likely.

Citigroup agreed to sell its German consumer banking unit to France's Credit Mutuel Group last week for 4.9-billion euros (US$7.7-billion).