Turmoil in housing and credit markets drove Citigroup Inc to its fourth straight quarterly loss, reflecting more than $13 billion of loan losses and write-downs for complex and risky debt.
The bank on Thursday said it was making good progress on shedding assets and cutting costs, including slashing 11,000 jobs since June. Yet it said tough credit and economic conditions worldwide could weigh on a variety of businesses, including investment banking and credit card lending.
In early afternoon trading the bank's shares were down 90 cents, or 5.5 percent, at $15.33 on the New York Stock Exchange. The KBW Bank Index was down 1.4 percent.
"There will be two types of banks: those that survive and grab market share, and those that struggle," said Matt McCormick, a portfolio manager at Bahl & Gaynor Investment Counsel in Cincinnati. "Citigroup is trying to position itself as being in the strong camp. But that doesn't make their job any easier."
Citigroup's third-quarter net loss totaled $2.82 billion, or 60 cents per share, compared with a profit of $2.21 billion, or 44 cents, a year earlier. Its loss from continuing operations was $3.42 billion, or 71 cents per share.
Revenue fell 23 percent to $16.68 billion. Expenses totaled $14.43 billion, up 2 percent from a year earlier but down 8 percent from the second quarter.
Analysts, on average, expected a loss of 70 cents per share on revenue of $19.42 billion, according to Reuters Estimates. Results largely reflected the bank's late-September forecast. The bank has lost close to $20.3 billion in the last year.
Citigroup shed $50 billion in assets during the third quarter, ceding its title as the largest U.S. bank by assets to JPMorgan Chase & Co.
JPMorgan ended September with $2.25 trillion in assets, compared with $2.05 trillion at Citigroup. Bank of America Corp
would pass both if it completes its planned acquisition of Merrill Lynch & Co in early 2009.
Citigroup Chief Executive Vikram Pandit has cut 23,000 jobs in 2008, leaving the bank with 352,000 employees. He is also trying to shed $400 billion in assets to help restore investor confidence. The bank's stock has fallen by more than two-thirds since early 2007.
CONSUMER CREDIT DETERIORATES
Quarterly results reflected $4.42 billion of net write-downs tied to mortgage debt, leveraged loans and other investments, and a $612 million charge for a regulatory settlement related to auction-rate securities.
Citigroup also reported an 86 percent increase in credit costs to $9.1 billion, including $4.92 billion in net credit losses and a $3.9 billion increase in loan loss reserves.
On a conference call, Chief Financial Officer Gary Crittenden said there is broad deterioration in consumer credit worldwide, with particular stress in Brazil, India and Mexico. The bank operates in more than 100 countries.
Citigroup has recorded more than $71 billion in credit costs and write-downs since June 2007, and has raised more than $40 billion in capital from investors.
It is also receiving $25 billion from the U.S. Treasury Department's Troubled Asset Relief Program, one of nine banks to receive initial injections.
"Being handed $25 billion means they don't have to come to the market, and I think that's huge," said Anton Schutz, president of Mendon Capital Advisors Corp in Rochester, New York, which owns Citigroup shares.
Citigroup's Tier-1 capital ratio, a measure of its ability to cover losses, was 8.2 percent as of Sept. 30, compared with 8.74 percent three months earlier and 7.12 percent at the end of 2007. Regulators consider 6 percent sufficient.
In an interview, Crittenden said the bank has no compelling need to raise more capital now. He offered few details on how the bank will use the new capital, but said Citigroup wants to expand in retail banking, credit cards, investment banking and trading, wealth management and transaction services.
The third-quarter results came barely a week after Citigroup lost out to Wells Fargo & Co in a bid to buy much of troubled banking giant Wachovia Corp.
Citigroup $2.16 billion offer for much of Wachovia would have quadrupled its undersized U.S. branch network. Wachovia later accepted Wells Fargo's $15 billion offer for the entire company. Citigroup has sued for $60 billion of damages, claiming breach of contract and interference with its rights.
In the interview, Crittenden said "we would have interest in looking at businesses like" Wachovia, where the bank could add U.S. deposits without substantial downside risk.
Through Wednesday, Citigroup shares had fallen 45 percent this year, compared with a 35 percent drop in the KBW index.
(Additional reporting by Joseph A. Giannone; Editing by Jeffrey Benkoe and John Wallace)