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Citi Loses $7.6 Billion on TARP Repayment


By Bradley Keoun and Michael J. Moore

(Bloomberg) — Citigroup Inc., the U.S. bank that is 27 percent owned by the Treasury Department, ended a three-quarter profit streak with a $7.6 billion loss on costs to exit the government's bailout program.

The fourth-quarter loss of 33 cents a share was narrower than the record loss of $17.3 billion, or $3.40 a share, a year earlier, New York-based Citigroup said today in a statement. The company was expected to lose 30 cents a share, the average estimate of 18 analysts surveyed by Bloomberg.

Chief Executive Officer Vikram Pandit had to book an $8 billion pretax charge when he repaid $20 billion of bailout funds in December to avoid being left behind by rival banks that exited the Troubled Asset Relief Program. Taxpayers still own 7.7 billion Citigroup shares, and Pandit failed to restore the bank to profitability in his second full year in the top job.

"It's been a tumultuous two years," said William Fitzpatrick, a financial-industry analyst with Optique Capital Management in Racine, Wisconsin, which oversees about $850 million. "They're probably done capital-raising, and investors now want some visibility on what the earnings power is."

Citigroup may spend most of 2010 recovering from the bailout, grappling with more loan losses and pushing to sell or wind down unwanted businesses with more than $600 billion of assets, or a third of the bank's total.

'Enormous Progress'

"We have made enormous progress in 2009," Pandit said in the statement. "It was our responsibility to get our own house in order. We greatly improved Citi's capital strength, reduced the size and scope of the company, and refocused our business strategy to take advantage of our unmatched global network."

Citigroup's fourth-quarter loss contrasts with results at New York-based JPMorgan Chase & Co., which said last week that profit more than quadrupled from a year earlier to $3.28 billion as investment-banking fees climbed.

Citi Holdings, the collection of businesses tagged for disposal, had a $2.44 billion loss in the fourth quarter. Citi Holdings assets declined $70 billion to $547 billion during the quarter.

Citicorp, the division of businesses that Pandit plans to keep, had a $1.73 billion profit in the fourth quarter, compared with a $5.52 billion loss a year earlier.

Citigroup's revenue fell 4.3 percent to $5.41 billion in the fourth quarter, the company said. The bank's Tier 1 Common ratio was 9.6 percent, up from 2.3 percent a year earlier.

Trading Revenue

Revenue from trading and investment-banking climbed 5.9 percent from a year earlier to $5.4 billion. Those figures exclude "credit value adjustments" of $1.9 billion, or losses required under U.S. accounting rules to reflect an increase in the market value of its own liabilities. The CVA for the fourth quarter included an $840 million pretax loss to correct for an error made in the way Citigroup calculated its CVAs in prior periods, the bank said in today's statement.

Consumer-banking revenue rose 0.2 percent to $5.72 billion.

Net credit losses were $7.13 billion, down from $7.97 billion last quarter. Citigroup added $706 million to its loan-loss reserves in the quarter, bringing the reserves to 6.1 percent of total loans.

"I'd be encouraged by the fact that the charge-offs are down," Oppenheimer & Co. analyst Chris Kotowski said in a Bloomberg Television interview.

Share Price

In New York trading, Citigroup's shares dropped to $3.39 from $3.42 on Jan. 15. That compares with $34.77 on Dec. 10, 2007, the last closing price before Pandit was named to the top post.

Pandit, 53, who has a Ph.D. in finance, took over in December 2007 following the ouster of Charles O. "Chuck" Prince. Pandit, who in January 2009 said he would take a salary of $1 a year until Citigroup turned profitable, personally got $165 million when he and his partners sold their Old Lane Partners LP hedge fund to the company in mid-2007.

After two years in the top job, Pandit's "honeymoon is over," Saudi investor Prince Alwaleed bin Talal said last week in an interview with Fox Business News. "It's time to deliver," Alwaleed said.

Optique's Fitzpatrick said Pandit probably needs to increase Citigroup's share price to at least $5 to keep his job beyond another year. The stock closed at $3.42 on Jan. 15.

'Hot Seat'

"I do think he's on the hot seat," Fitzpatrick said. "He just has to get back to divesting assets, trying to clean up the company as best he can, which was not the initial intent when he came on board. The markets have rallied over the last nine, 10 months, and you've got some buyers out there who are probably better-positioned to scoop up some of Citi's assets."

Citigroup is forecast to earn 9 cents a share this year, or 2 percent of what it made in 2005, based on Bloomberg's analyst survey. That's partly because Citigroup has had to issue almost 23 billion new shares to bolster a weakened capital base. Investors who were shareholders prior to the financial crisis were left with about one-fifth their original stakes.

Pandit sold $20 billion of shares to new investors last month to help repay the bailout funds, a move aimed partly to extract the company from executive-pay restrictions that threatened to drive away top-producing traders and investment-bankers. The government, which initially said it would sell as much as $5 billion of its shares in the offering, later scrapped the plan because the price was too low.

To contact the reporters on this story: Bradley Keoun in New York at bkeoun@bloomberg.net; Michael J. Moore in New York at mmoore55@bloomberg.net.


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