Citigroup Reports $8.29 Billion Loss, Completing Worst Year
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By Bradley Keoun and Josh Fineman
Jan. 16 (Bloomberg) --
Citigroup Inc. posted an $8.29 billion fourth-quarter loss, completing its worst year, as the credit crisis eroded mortgage-bond prices and customers missed more loan payments.
The net loss of $1.72 a share compared with a loss of $9.8 billion, or $1.99, a year earlier, the New York-based company said in a statement today. The results included a $3.9 billion gain from the sale of a German consumer bank. Analysts, excluding the gain, estimated the company would report a loss of $1.08 a share, according to a
survey by Bloomberg.
As Citigroup
plunged 77 percent last year in New York trading, the bank was forced to accept $45 billion of U.S. government rescue funds. Chief Executive Officer
Vikram Pandit agreed this week to cede control of the
Smith Barney brokerage to Morgan Stanley. He also said today he plans to sell the CitiFinancial consumer-lending unit and Tokyo-based
Nikko Asset Management Co..
“We view the divestiture of Smith Barney as a signal that conditions have materially weakened even from the lousy conditions that prevailed in late 2008,” CreditSights Inc. analyst
David Hendler wrote in a Jan. 14 note to clients.
Citigroup
fell 15 percent yesterday to $3.83 in New York Stock Exchange composite trading, partly on speculation the bank’s shareholders may suffer if Citigroup has to seek more government money. Spokesman
Mike Hanretta declined to comment on whether the bank is in discussions over an additional infusion.
Pandit’s Strategy
A dwindling capital cushion and sinking stock price forced the 52-year-old Pandit to abandon Citigroup’s decade-old strategy of providing investment advice alongside branch banking, stock underwriting and corporate lending. He’s shedding units to free up capital and save the bank from insolvency.
“They are going to try to home in on what’s worth something, and try and sell the pieces that they really can’t value,”
Todd Colvin, vice president of MF Global Inc., said in a Bloomberg TV interview.
The bank also said its Primerica Financial Services, a Duluth, Georgia-based life insurance company, will no longer be considered among “core” operations, which include banking, securities underwriting, corporate lending and payment- processing businesses.
CitiFinancial and Primerica were both building blocks of the colossus that former CEO
Sanford “Sandy” Weill assembled during a 17-year acquisition spree. The company solidified its strategy of serving corporate and individual clients around the world with a range of financial services in 1998, when Weill’s Travelers Group Inc. merged with
John Reed’s Citicorp to form Citigroup Inc.
Joint Venture
Citigroup plans to put Smith Barney into a $21 billion joint venture and relinquish majority control to Morgan Stanley. The deal, which bolsters Citigroup’s capital base with a $5.8 billion pretax gain, came less than two months after Pandit told employees he didn’t want to sell the business.
The plan to cut off “non-core” businesses in a deteriorating economy may put the bank into a deeper hole, Sanford C. Bernstein & Co. analyst
John McDonald wrote in a Jan. 14 report.
“It will likely be difficult for Citi to effectively dispose of assets and businesses in the current environment,” McDonald wrote. “Any new solution is likely to need an incremental infusion of common equity, either from the government, private investors or the public markets, any of which is likely to be dilutive to existing Citi shareholders.”
To contact the reporters on this story:
Bradley Keoun in New York at
bkeoun@bloomberg.net;
Josh Fineman in New York at
jfineman@bloomberg.net.
Last Updated: January 16, 2009 06:05 EST