The woes of the American banking sector deepened again yesterday as Citigroup, the largest bank in the United States by assets, reported a loss of $5.11bn (£2.56bn) in the first quarter of this year and announced that it was shedding a further 9,000 jobs.
Suffering like many of its rivals from disastrous bets placed on mortgages and leveraged loans before the full wrath of the credit crisis took hold, Citigroup was damaged by $16bn in writedowns. This follows $18.1bn in asset writedowns in the fourth quarter of last year.
While the loss was slightly higher than some had expected, Wall Street seemed to welcome the adjustments being made at Citigroup, sending its shares 4.5 per cent higher. The company lost $1.02 per share, compared to a net income in the first quarter of last year of $1.01 per share.
The results, said its chief executive, Vikram Pandit, show "the continuation of the unprecedented market and credit environment". The group, he added, would continue to divest non-core assets and focus capital on "the products and regions that will drive increased revenues, enhance the value of our franchise, and ultimately maximise shareholder value"
In recent weeks, Citigroup has moved to sell its Diners Club International credit card network as well as other businesses in leasing and commercial lending. The results were at least less grim than those of the last quarter of last year when the bank reported losses of almost $10bn.
"This is the quarter they get to clear the decks," said Arthur Hogan, the chief market analyst at Jefferies & Co in Boston. "Vikram Pandit is coming in and making pretty big changes, and that's what he gets to do. It's a cathartic quarter."
Writedowns at the bank in the quarter included $6bn tied to sub-prime mortgages, $3.1bn for loans to fund corporate buyouts, $1.5bn for exposure to bond insurers, $1.5bn for auction-rate securities, $1bn for below-prime 'Alt-A' mortgages, and $600m for commercial real estate.
Alarm bells continue to ring also in its US consumer unit, where profit fell 84 per cent compared to the first quarter last year to $279m. Pressure to correct the decline will fall mainly on Terri Dial, recently recruited from Lloyds TSB to run the ailing business.Reuse content