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Failed loans weigh on Citigroup earnings
written by Associated Press
October 15, 2009
CHARLOTTE, N.C. - Citigroup provided a sobering reminder Thursday that the economy is still struggling, reporting that its third-quarter results were weighed down by billions of dollars in failed loans [FORECLOSURES].
The bank reported a $101 million profit before accounting for $288 million in preferred stock dividends and the debt exchange offer that gave the government a 34 percent stake in the bank. Including those items, the New York-based bank reported a $3.24 billion loss.
Investors reacted negatively to the bank's report of continuing heavy loan losses, and sent Citigroup shares down 18 cents, or 3.6 percent, to $4.82 in morning trading.
The bank, one of the hardest hit during the credit crisis and recession, said loan losses during the quarter came to $8 billion, down $386 million from nearly $8.4 billion in the second quarter, but a sign that many consumers continue to be overwhelmed. Banks including Citigroup had warned when second-quarter earnings were released that loan losses would continue into next year.
Citigroup, like other national banks, has seen more customers stop repaying loans as the U.S. economy falters and unemployment rises. Credit card defaults and mortgage losses are likely to continue to climb. Losses on credit cards typically mirror unemployment, which rose to 9.8 percent in September. [<<<<<< VERY IMPORTANT!]
Economists predict the jobless rate will pass 10 percent in the coming months.
The debt exchange offer completed during the quarter gave Citigroup a better mix of capital to withstand additional loan losses and further weakening in the economy. It resulted in the government owning a 34 percent stake in Citigroup. The company took an accounting charge of $3.06 billion as a result of the exchange, contributing to the majority of its third-quarter loss.
Citigroup has received $45 billion in loans from the U.S. government, part of which was converted to that ownership stake. It has also received guarantees to protect against losses on more than $300 billion in risky assets [TOXIC ASSETS].
Failed loans weigh on Citigroup earnings
written by Associated Press
October 15, 2009
CHARLOTTE, N.C. - Citigroup provided a sobering reminder Thursday that the economy is still struggling, reporting that its third-quarter results were weighed down by billions of dollars in failed loans [FORECLOSURES].
The bank reported a $101 million profit before accounting for $288 million in preferred stock dividends and the debt exchange offer that gave the government a 34 percent stake in the bank. Including those items, the New York-based bank reported a $3.24 billion loss.
Investors reacted negatively to the bank's report of continuing heavy loan losses, and sent Citigroup shares down 18 cents, or 3.6 percent, to $4.82 in morning trading.
The bank, one of the hardest hit during the credit crisis and recession, said loan losses during the quarter came to $8 billion, down $386 million from nearly $8.4 billion in the second quarter, but a sign that many consumers continue to be overwhelmed. Banks including Citigroup had warned when second-quarter earnings were released that loan losses would continue into next year.
Citigroup, like other national banks, has seen more customers stop repaying loans as the U.S. economy falters and unemployment rises. Credit card defaults and mortgage losses are likely to continue to climb. Losses on credit cards typically mirror unemployment, which rose to 9.8 percent in September. [<<<<<< VERY IMPORTANT!]
Economists predict the jobless rate will pass 10 percent in the coming months.
The debt exchange offer completed during the quarter gave Citigroup a better mix of capital to withstand additional loan losses and further weakening in the economy. It resulted in the government owning a 34 percent stake in Citigroup. The company took an accounting charge of $3.06 billion as a result of the exchange, contributing to the majority of its third-quarter loss.
Citigroup has received $45 billion in loans from the U.S. government, part of which was converted to that ownership stake. It has also received guarantees to protect against losses on more than $300 billion in risky assets [TOXIC ASSETS].
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