Citigroup posts another big loss

Citigroup has reported another big loss, although it lost less money than had been expected.

The biggest US bank by assets lost $2.5bn (£1.3bn) in the three months to the end of June, weighed down by another $11.7bn of write-downs.

Citigroup said it had cut 11,000 jobs in the first six months of the year and planned to continue at the same rate.

Related article: US: Financial system is a house of cards

The company’s shares rose 7.7% to close at $19.35, following the smaller-than-expected losses.

It is Citigroup’s third consecutive quarter of losses, following shortfalls of $5.11bn and $9.83bn.

Credit losses

The losses spring from problems in the credit markets because of uncertainty about the value of mortgage-backed debt issued by US banks.

It has left banks worldwide reluctant to lend money to each other, because they are uncertain about whether the other banks are creditworthy and whether they will need the money themselves.

The credit market turmoil has forced the industry to axe thousands of jobs as it attempts to reduce costs, with more cutbacks expected in the year ahead.

Chief executive Vikram Pandit said: “While there is still much to do, we are encouraged by our progress.”

An element of bad news in the three-month results is that Citigroup’s credit costs have jumped to $7.2bn, as more of its own customers are defaulting on their loans.

That means that while the losses from mortgage-backed debt may be slowing, the losses from Citigroup’s own mortgages, car loans and credit cards are growing.

But some analysts believe there could be light at the end of the tunnel.

“While several global or major national banks delivered lousy earnings, the mortgage or credit market related write-offs weren’t nearly as bad as expected and appear to be lessening,” said Fred Dickson, an analyst at DA Davidson & Co.

Friday, 18 July 2008

Source: BBC News

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