Wall Street Journal
written by David Enrich
January 20, 2010
Citigroup Inc., still limping along, posted a $7.6 billion net loss in the fourth quarter as its investment bank missed out on the resurgence that has lifted many rival firms.
The loss dragged Citigroup to its second unprofitable year in a row, reinforcing lingering questions among some analysts and investors about the New York company's strategy.
The bulk of the fourth-quarter net loss stemmed from accounting charges related to Citigroup's repayment of $20 billion of federal bailout funds late last year. But excluding that hit, the results still were lackluster. Revenue of $5.4 billion was down about 4% compared with a year earlier.
Chief Executive Vikram Pandit said Citigroup "made enormous progress" during 2009, including whittling down its pile of unwanted assets and business lines while bolstering Citigroup's capital buffers. Still, executives stopped short Tuesday of predicting that Citigroup will turn a profit in 2010.
"We're driving this place toward sustained profitability," Citigroup Chief Financial Officer John Gerspach said in an interview. "What you're going to see is progress toward that goal in 2010. Whether we have positive net income is going to depend" on a slew of outside factors, including the health of economies around the world.
Analysts said uncertainty about when Citigroup will regain profitability is hanging over the company's shares. The stock climbed 12 cents, or 3.5%, to $3.54 in 4 p.m. New York Stock Exchange composite trading.
Mr. Pandit, who became CEO in late 2007, is under mounting pressure to show the giant company is healthy enough to consistently churn out profits.
Saudi Prince Alwaleed bin Talal, one of Citigroup's largest individual shareholders, warned last week on Fox Business Network that Mr. Pandit's "honeymoon is over now," adding that this year is "the year to make it or break it, and he has to deliver."
Mr. Gerspach acknowledged some disappointments in company's fourth-quarter results, especially investment banking. The unit's $300 million quarterly profit was far below what analysts had been expecting. The business would have posted a net loss if not for a $415 million income-tax benefit.
In the U.S., the company painted a bleaker picture, even though losses on consumer loans are showing tentative signs of flattening. But revenue from its U.S. retail-banking and credit-card operations remained depressed due to the weak U.S. economy and new federal restrictions on credit-card practices.
Further eroding Citigroup's fourth-quarter results, the company on Tuesday acknowledged a series of accounting errors involving how the company valued its debt during roughly a two-year period. The errors had the effect of inflating Citigroup's previously reported quarterly results.
For example, last year's third-quarter profit of $101 million was overstated by $121 million as a result of the accounting error, Citigroup said Tuesday. That means the company actually had a net loss of about $20 million, not its third quarterly profit in a row, as the company initially announced.
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