Citigroup to cut jobs after quarterly loss
US banking giant Citigroup reported on Friday a 5.1 billion dollars net loss during the first quarter and said it would cut an additional 9,000 jobs as it struggles with bad bets on subprime mortgages.
It was the second consecutive quarterly loss for the banking titan, heavily exposed to the subprime, or high-risk, mortgage crisis stemming from the worst US housing slump in decades and signs of recession in the world's biggest economy.
But the first-quarter loss was almost half the prior quarter's loss of 9.83 billion dollars, and coupled with cost-cutting measures such as job cuts Citigroup Inc., under its new chief executive Vikram Pandit, appears to be putting the credit crisis behind it, analysts said.
Citigroup took 13.9 billion dollars in write-downs during the first quarter, the bank's chief financial officer, Gary Crittenden, said in a conference call.
Crittenden cited additional write-downs that had not appeared in a list of write-downs and the company's earnings report, which AFP had tallied that list at approximately 12 billion dollars.
Earnings per share were a negative 1.02 dollars, seven cents steeper than the loss that most analysts' forecast.
Citigroup is now the US bank hardest hit by the subprime crisis that erupted in August, wreaking havoc on financial markets and leading to a credit squeeze that is stifling growth in the global economy.
The bank has taken more than 30 billion dollars in write-downs since the crisis, more than investment bank Merrill Lynch, which reported Thursday a net loss of nearly two billion dollars and nine billion dollars in write-downs.
Citigroup said the first-quarter net loss was mainly driven by fixed-income results and higher consumer credit costs.
Turmoil from the mortgage and credit markets cost the bank almost 12 billion dollars and consumer credit problems required a 3.1-billion-dollar increase in credit costs.
Pandit, who became CEO in December after Charles Prince was ousted amid the bank's ballooning losses, said the financial results "reflect the continuation of the unprecedented market and credit environment and its impact on our historical risk positions."
Pandit noted that the bank recently reorganized its businesses along regional and product lines and would continue to divest non-strategic assets and reallocate capital. He recalled 30 billion dollars of capital had been raised during December and January to strengthen its balance sheet.
Citigroup CFO Crittenden said in the conference call that 9,000 jobs would be cut in the first quarter, most of them in its retail banking arm, and in addition to the 4,200 workforce reductions announced in the previous quarter. The bank had a workforce of about 370,000 at end-March.
The stock rallied "on the notion that the worst of the bank's problems are behind it," said Patrick O'Hare, an analyst at Briefing.com.
"The report from Citigroup has been met with a sigh of relief as the banking giant fell short of consensus estimates by 'only' seven cents and reported first-quarter write-downs of 'only' 12 billion dollars," he said.
Shares in Citi, a Dow industrials component, were up 6.78 per cent at 25.66 dollars around 1538 GMT.
UBS analyst Glenn Schorr said that while Citigroup's earnings outlook was not great, the financial services company is finally showing some stability.
"Importantly," Schorr said in a research note, "Citi seems to be doing all it can to clean the decks and move forward."