Citi Still Playing Catch-up as Credit Losses Bite

NEW YORK (Reuters) - Citigroup Inc posted a quarterly per-share loss as it suffered $8 billion of credit losses, raising questions about when the bank can return to sustained profitability.

The loss per share was narrower than analysts expected but still underlined how far the bank has to go to catch up with stronger rivals like JPMorgan Chase & Co . Citigroup has received $45 billion of capital from the U.S. government and is now one-third owned by taxpayers, while JPMorgan has paid back the government bailout it received last year.

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Citigroup's shares were down 6 percent to $4.70 in afternoon trade.

"On first blush, this is not particularly optimistic," said Tim Ghriskey, chief investment officer of Solaris Asset Management in Bedford Hills, New York. "They did beat on earnings and revenue, but the $8 billion credit losses ... is a reminder that we are in a weak economic environment."

The bank did post net income of $101 million, but it reported a $529 million loss from continuing operations before taxes. The ultimate bottom line for shareholders was negative, including one-time losses from converting preferred shares into common stock, and tax benefits.

Results were further muddied by accounting losses that resulted from the bank's bonds performing better.

"It can give you brain damage trying to figure this out," said Walter Todd, portfolio manager at Greenwood Capital Management in Greenwood, South Carolina. "With all the other opportunities out there in the financial space, I don't know why you'd spend the time to try to understand what the heck's going on here, unless you can take a lot of risk."

Citigroup set aside less money to cover bad loans than it did in last year's third quarter, but that may make sense because the bank's assets also declined from the year-ago period, and net credit losses declined from the second quarter. The bank said it has enough money set aside to cover losses in consumers loans for the next 13.3 months, the highest level in at least two years.