MercoPress. South Atlantic News Agency

Citigroup losses: when bad news becomes good news

Citigroup, the biggest bank of USA lost U$S 5.110 M

New York based Citigroup has suffered a second massive loss and is cutting 9,000 jobs as the credit crisis continues to take its toll on the biggest US bank.

It made a loss of 5.11 billion US dollars in the first quarter, although this was smaller than the 9.8 billion loss reported in the final three months of 2007. The results included about 12 billion of write-downs for sub-prime mortgages and other risky assets. Lenders worldwide have written off more than 200 billion hit by the credit crisis. The job cuts are on top of 4,200 layoffs announced in January. Citigroup employs about 369,000 employees worldwide, with 11,000 based in London. "Our financial results reflect the continuation of the unprecedented market and credit environment" said Citigroup chief executive Vikram Pandit. Pandit said he was "not happy" with the results adding Citigroup was selling assets to free up capital and shedding units outside the company's "core" retail banking, trading, investment-banking and transaction-processing businesses. Since replacing former CEO Charles Prince five months ago following a record fourth-quarter loss of almost 10 billion, Pandit has cut holdings of subprime-infected "collateralized mortgage obligations" by 23% and pared money-losing leveraged-buyout loans by 35%. He's hired seven senior executives to monitor trading risks. Only Switzerland's UBS has reported bigger write-downs and credit losses than Citigroup from the collapse of the sub-prime mortgage market. The loss was slightly deeper than many analysts had expected but European and US stock markets rose in relief there were no nasty surprises. Citigroup shares rose in early trade on Wall Street. "The market is shrugging it off. We knew there were going to be write-offs and [Citigroup] hasn't yet said anything far too negative" said Andrea Williams, head of European equities at Royal London Asset Management. Earlier this week, Citigroup rival Merrill Lynch said it lost 1.96 billion in the first quarter of 2008 and unveiled plans to cut about 4,000 jobs worldwide. Merrill's results included about 4.5 billion of sub-prime related write-downs. Citigroup's revenues plunged 48% to 13.2 billion as the bank wrote-down the value of assets linked to sub-prime mortgages - those given to people with poor or patchy credit histories. Of the write-downs, 6 billion was directly related to the sub-prime market, with the remainder due to other assets and exposure affected by the credit crisis. It also saw a 3.1 billion increase in consumer credit costs due as people failed to keep up with payments on mortgages, unsecured personal loans, credit cards and auto loans. Last year, investments and assets based on sub-prime loans quickly soured as higher interest rates pushed up mortgage payments and triggered a wave of defaults. Banks became more reluctant to lend to each other as the scale of bad debts remained unknown, leading to a shortage of credit worldwide. The credit crunch resulted in the collapse of US banking giant Bear Stearns and is being felt in the wider economy as consumers pare back debt-fuelled spending and grapple with higher mortgage payments.