Citigroup Inc said on Monday third-quarter profit fell 57 percent as losses mounted from subprime and leveraged loans, fixed-income trading and its U.S. consumer business.
The earnings decline was the largest in three years for the No. 1 U.S. bank, and reflected $6.5 billion of pre-tax losses and write downs, $600 million more than previously estimated.
Charles Prince, Citigroup’s Chief Executive, said it was a "disappointing quarter, even in the context of the dislocations in the sub-prime mortgage and credit markets," adding that the quarter's performance was “frankly surprising.”
Net income fell to $2.38 billion, or 47 cents per share, from $5.51 billion, or $1.10, a year earlier.
Revenue rose 6 percent to $22.66 billion, while operating expenses increased 22 percent to $14.56 billion. Return on equity was 7.4 percent.
Analysts on average expected profit of 43 cents per share on revenue of $20.81 billion.
The report follows Citigroup’s forecast on October 1 which projected a 60 percent drop in profit.
Volatility
Citigroup blamed the trading loss on "significant market volatility and disruption of historical pricing relationships".
The drying up of market liquidity during the summer meant it was virtually impossible in some cases for traders to mark their positions to market.
On sub-prime mortgages, the bank took a $1.56 billion hit that it was preparing to use in highly structured credit portfolios.
Meanwhile, Citi said investment banking revenues halved to $541 million, as it wrote off $901 million on leveraged loans it was expecting to make.
Similar write-downs of $451 million meant that lending revenues at the markets and banking arm fell 14 percent to $412 million.
October 15 2007
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