Citigroup Inc. reported a net loss of $8.29 billion (Rs40,455 crore today) for the fourth quarter (Q4), putting the year’s red ink at $18.72 billion, as the company announced it will reorganize into two business lines focused on banking and other financial services.
Citicorp will focus on Citigroup’s banking operations in more than 100 countries, while Citi Holdings will be made up of asset management and consumer finance. The management at Citi Holdings will focus on “tightly managing risks and losses”, the company said on Friday.
More trouble: Citigroup CEO Vikram Pandit. Jin Lee / Bloomberg
The bank is still roiling from its mortgage-related securities and the credit crisis.
The reorganization is part of the company’s plan to pull away from the “supermarket” model that has long defined it.
The move started earlier this week when Citigroup agreed to combine its Smith Barney brokerage unit with Morgan Stanley’s brokers, creating the world’s largest brokerage firm.
Citi said on Friday it planned to make the transition to two companies as quickly as possible. A search is under way for a leader for Citi Holdings.
Citi’s shares were recently up 7.6% at $4.12 in pre-market trading. The stock has lost 43% this month alone as fresh concerns emerged about the company’s viability. Citi posted a Q4 net loss of $8.29 billion, or $1.72 a share, compared with a year-ago net loss of $9.83 billion, or $1.99 a share.
The latest results, besides the write-downs, included $6.1 billion in net credit losses. Revenue fell 13% to $5.6 billion, hurt by the securities and banking write-downs.
“Our results continued to be depressed by an unprecedented dislocation in capital markets and a weak economy,” said chief executive Vikram Pandit. He added the company strengthened its liquidity and reduced risk on its balance sheet during the quarter.
Citi’s largest business, consumer banking, posted a wider loss as revenue fell 22% on a decline in investment sales and lower mortgage servicing revenue. Similar declines were seen for the credit card operations and the results also remained deep in the red for the institutional clients group, including Citi’s securities and investment banking operations.
The global wealth management business, including Smith Barney and Citi’s private bank, saw its loss balloon as revenue fell 18%.
Citi investors had started to believe the worst was over as losses narrowed earlier last year. But the company, seems to have woes that are far from over. It cut about 50,000 jobs, or about 15% of its global workforce, as it looks to cut costs and boost liquidity. Pandit and chairman Win Bischoff are foregoing their annual bonuses, and bonuses for other top executives will be reduced “substantially”, Pandit had said last month. Earlier this month, Citi’s board supported him despite mounting losses.
Since being named CEO in December 2007, Pandit hasn’t been able to stop the financial bleeding, despite a $45 billion taxpayer capital infusion in November that made the US government Citigroup’s largest shareholder.
wsj@livemint.com