New York, NY – Citigroup Inc. (NYSE:C) today reported a net loss for the 2008 first quarter of $5.1 billion, or $1.02 per share, based on 5,086 million shares outstanding(1). Results include $6.0 billion in pre-tax write-downs and credit costs on sub-prime related direct exposures. Results also include write-downs of $3.1 billion (net of underwriting fees) on funded and unfunded highly leveraged finance commitments, a downward credit value adjustment of $1.5 billion related to exposure to monoline insurers, write-downs of $1.5 billion on auction rate securities inventory, and a $3.1 billion increase in credit costs in global consumer.
First Quarter Highlights
"Our financial results reflect the continuation of the unprecedented market and credit environment and its impact on our historical risk positions. During the first quarter, valuations of our sub-prime related exposures in fixed income markets and leveraged finance assets have further declined and credit costs in our consumer lending businesses have increased. Despite the negative factors in the broader markets, we continue to see strong momentum throughout the organization with robust volumes in many of our products and regions," said Vikram Pandit, Chief Executive Officer of Citi.
"We have taken decisive and significant actions to strengthen our balance sheet, including over $30 billion of capital raised during December and January, a significant increase in our credit reserves, the sale of Redecard shares, the recently announced divestitures of CitiCapital and Diners Club International, and the realignment of and pending asset reductions in our mortgage business. We continue to enhance our risk management processes, our capital productivity and expense containment, as well as our ability to deliver innovative, world-class products that meet our clients' specific needs. To achieve this, we recently reorganized the businesses along regional and product lines to bring us closer to our clients. At the same time, we are taking the necessary steps to make Citi more efficient while fostering a culture of accountability and teamwork."
"As we move into the second quarter and beyond, we will continue to divest non-strategic assets and allocate capital to the products and regions that will drive increased revenues, enhance the value of our franchise, and ultimately, maximize shareholder value," said Pandit.
FIRST QUARTER SUMMARY
Expense growth was also driven by higher business volumes. The increase in expenses was offset partially by the absence of a $1.4 billion charge related to the structural expense review in the prior-year period.
GLOBAL CONSUMER GROUP
Revenues grew 3% due to a 4% increase in average deposits, a 9% increase in average managed loans and a $349 million pre-tax gain on Visa shares, offset by lower securitization results in cards. Excluding the gain on Visa shares and a $161 million pre-tax gain on the sale of MasterCard shares in the first quarter of 2007, revenues were up 1%. Expenses increased 6%, driven by acquisitions and a repositioning charge of $131 million, partially offset by a $159 million release of the Visa-related litigation reserve. Credit costs increased $2.3 billion, primarily reflecting a weakening of leading credit indicators, including higher delinquencies on mortgages, unsecured personal loans, credit cards and auto loans. Credit costs also increased due to trends in the U.S. macro-economic environment, including the housing market downturn and rising unemployment rates, as well as portfolio growth.
Revenues increased 33%, driven by organic growth, the impact of recent acquisitions, a $663 million pre-tax gain on Redecard shares, and a $97 million pre-tax gain on Visa shares. Excluding the gains on Redecard and Visa shares, as well as a gain on sale of MasterCard shares in the prior-year period, revenues increased 22%. Revenue growth was offset partially by a decline in Japan consumer finance. Average deposits and loans were up 23% and 30%, respectively. Expenses increased 18%, primarily due to acquisitions, higher business volumes, and a $106 million repositioning charge, partially offset by a $257 million benefit related to a legal vehicle restructuring in Mexico. Credit costs increased substantially, primarily driven by Mexico cards and India consumer finance, as well as by acquisitions and portfolio growth. Net income increased 33%, primarily due to increased business volumes and the gain on Redecard and Visa shares.
MARKETS & BANKING
Negative revenues were partially offset by record revenues in foreign exchange and local emerging markets.
GLOBAL WEALTH MANAGEMENT
Corporate/Other income improved $248 million. The current period included a $212 million pre-tax write-down of an equity investment held by Nikko Cordial. The prior-year period included a $1.4 billion charge related to a structural expense review, partially offset by a gain on the sale of certain corporate-owned assets.
A reconciliation of non-GAAP financial information contained in this press release is set forth on page 12.
Vikram Pandit, Chief Executive Officer, and Gary Crittenden, Chief Financial Officer, will host a conference call today at 8:30 AM (EDT). A live webcast of the presentation, as well as financial results and presentation materials, will be available at http://www.citigroup.com/citigroup/fin. A replay of the webcast will be available at http://www.citigroup.com/citigroup/fin/pres.htm.
Citi, the leading global financial services company, has some 200 million customer accounts and does business in more than 100 countries, providing consumers, corporations, governments and institutions with a broad range of financial products and services, including consumer banking and credit, corporate and investment banking, securities brokerage, and wealth management. Citi's major brand names include Citibank, CitiFinancial, Primerica, Smith Barney, Banamex, and Nikko. Additional information may be found at www.citigroup.com or www.citi.com.
Additional financial, statistical, and business-related information, as well as business and segment trends, is included in a Financial Supplement. Both the earnings release and the Financial Supplement are available on Citi's website at www.citigroup.com or www.citi.com.
Certain statements in this document are "forward-looking statements" within the meaning of the Private Securities Litigation Reform Act. These statements are based on management's current expectations and are subject to uncertainty and changes in circumstances. Actual results may differ materially from those included in these statements due to a variety of factors. More information about these factors is contained in Citigroup's filings with the Securities and Exchange Commission.