CITIGROUP’S QUARTERLY earnings fell 12 per cent as it was stung by losses from credit crisis-era assets, but the bank’s results were better than many analysts expected after cost-cutting.
The third largest US bank is still feeling pain from Citi Holdings, a unit set up in 2009 to house assets and businesses it was looking to shed as the 2007-2008 credit crunch forced multiple US government rescues.
Citi Holdings’ losses widened to $920 million in the second quarter from $661 million in the same period a year earlier.
The results showed how even after Citi has paid back the government it is still dealing with bad assets from the credit crunch.
“This is a continuation of the trend we’ve been seeing at Citi for a while – a slow healing of the balance sheet, but significant persistent challenges in healing profitability,” said Tony Smith, senior director of fixed-income capital markets research at Moody’s Analytics.
Shrinking a business is tough, the results showed. Citigroup is not cutting costs in Citi Holdings as fast as revenues are dropping – operating expenses fell 25 per cent but revenue tumbled 62 per cent.
On a conference call with journalists, chief financial officer John Gerspach said Citi Holdings’ costs fell in line with its assets, which were down about 28 per cent from the same quarter last year, reaching $191 billion at the end of June 2012.
Yet the bank performed better than analysts had estimated, helped by cost-cutting elsewhere in the company, most notably in its investment bank where it cut out $322 million of expenses, allowing the investment bank’s net income to rise 18 per cent to $1.275 billion.
Citigroup has been laying off staff in its investment bank for three quarters or so, Mr Gerspach said. There could be more layoffs in coming quarters, although they would not likely be significant.
“These are reductions that are geared towards just making sure we’ve got the capacity right and making sure we’re the most efficient organisation that we can be.”
Overall net income fell to $2.946 billion, or 95 cents per share, from $3.34 billion, or $1.09 a share, in the same quarter a year earlier. Overall operating expenses fell 6 per cent to $12.13 billion. – (Reuters)
