Citigroup posts 4th straight loss; Merrill loss widens
NEW YORK -- Two banks knee deep in the financial turmoil swirling around posted losses in the third quarter Thursday as fallout from the credit crisis continued.
The bank said Thursday it lost $2.8 billion, or 60 cents a share, in the third quarter, compared with a profit of $2.2 billion, or 44 cents a share, a year ago. The deficit for the July-to-September period brings Citi's total losses over the past 12 months to $20.2 billion.
The shortfall for the quarter was narrower than anticipated. Analysts polled by Thomson Reuters expected a loss of 70 cents a share.
But the results were hardly reassuring. Citi wrote down $4.4 billion in investments, plus another $612 million from a settlement related to auction-rate securities; recorded $4.9 billion in credit losses; and took a $3.9 billion charge to boost reserves. The bank has written down the value of its investments tied to souring mortgages and other bad debt by about $51 billion since this time last year.
The frailty of the financial system has led the government to pledge $25 billion to each of the big four U.S. banks — Citigroup, JPMorgan Chase, Bank of America and Wells Fargo. Of these four institutions, Citi appears to be on the shakiest footing. It is the only one to have posted quarterly losses over the past year, and it is shrinking while its peers are growing.
With $2.05 trillion in total assets now, Citigroup has officially forfeited the title of largest bank by assets, falling behind JPMorgan Chase's $2.25 trillion in total assets. Bank of America currently has $1.91 trillion in assets, and will have more when it completes its buyout of Merrill Lynch, which on Thursday reported a $5.2 billion loss. Wells Fargo has assets of $622 billion ahead of its acquisition of Wachovia.
Citi not only eliminated 11,000 jobs during the third quarter — bringing its total headcount reduction so far this year to 23,000 — but it also shed $50 billion in assets. CEO Vikram Pandit announced in May that Citi intends to rid itself of nearly $500 billion in assets to get out of businesses such as risky mortgages; the bank said that over the past year, it has lopped off $308 billion in total assets.
Meanwhile, the bank has not made any major acquisitions. While JPMorgan Chase snapped up Bear Stearns and Washington Mutual, and while Bank of America nabbed Merrill Lynch, Citigroup lost the bid for Wachovia and its massive deposit base to Wells Fargo.
"With Wachovia out of the picture, there is no doubt that Citigroup will pursue another acquisition," said Isabel Schauerte, an analyst with the research and consulting firm Celent, in a note. "However, if anything, these results suggest that the bank should focus on repairing its troubled balance sheet while waiting for another buying opportunity that has the scale Citi is hungry for."
