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Citigroup Inc.'s disappointing third-quarter results highlight a growing economic divide in the United States: Wall Street is thriving, but Main Street is still ailing.
Dragged down by share conversions and one-time charges, Citigroup posted a slim $101-million (U.S.) profit yesterday, along with a per-share loss and a $529-million loss from continuing operations.
Like JPMorgan Chase & Co. and Goldman Sachs Group Inc., Citigroup's bond trading and other investment banking operations generated healthy profits. But those profits were overwhelmed by steep losses in its traditional business of lending money to consumers and companies.
Citigroup's $101-million profit excludes preferred stock dividends and a $3.1-billion charge linked to converting preferred shares into common stock.
The bank's major problem remains its loan portfolio. Citigroup, which is one-third owned by the U.S. government and still owes the Treasury Department $45-billion, suffered $8-billion in credit losses in the quarter.
That compares with $4.9-billion in the same quarter last year and $8.4-billion in the second quarter of 2009.
In the three-month period ended in September, Citigroup posted a net loss attributable to shareholders of $3.2-billion or 27 cents a share. That compares with a loss of $2.9-billion or 61 cents a share in the year-earlier quarter. Citigroup has now rung up more than $37-billion in losses since the end of 2007.
Many analysts are now loath to predict when Citigroup might return to profitability, and chief executive officer Vikram Pandit wasn't making any promises yesterday. A key source of uncertainty for Citigroup is the performance of its U.S. credit card and mortgage loans, which have suffered.
"Clearly, U.S. consumer credit remains the number one issue affecting our near-term results," Mr. Pandit told reporters and analysts on a conference call.
The bank said it has enough money set aside to cover losses in consumer’s loans for the next 13 months, the highest level in at least two years.
Investors punished Citigroup stock after the release of the third-quarter results as its shares fell 5 per cent.
The U.S. economic landscape remains fragile. Unemployment is still rising, real estates prices continue to fall in many markets and consumer demand for loans is weak as Americans struggle to pay off their debts.
The bank's inability to post earnings from its main businesses has made some analysts and investors impatient. The shares trade at about three-quarters of their book value, while competitors trade above their book value.
CITIGROUP INC. Close: $4.75 (U.S.), down 25¢
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