|On February 27, 2009, Citi announced a fourth quarter 2008 goodwill impairment charge and a further impairment to the intangible asset related to Nikko Asset Management. These pre-tax charges of approximately $9.9 billion are not reflected in the fourth quarter 2008 press release, financial supplement and investor presentation, each dated January 16, 2009. For updated financial information, please refer to the Citigroup, Inc. 2008 Form 10-K filed with the U.S. Securities
New York, NY, January 16, 2009 — Citigroup Inc. (NYSE: C) today reported a net loss for the 2008 fourth quarter of $8.29 billion, or $1.72 per share, based on 5,347 million shares outstanding. Revenues of $5.6 billion were affected by write-downs and losses in Securities and Banking. Results also include $6.1 billion in net credit losses and a $6.0 billion net loan loss reserve build.
For the full year 2008, Citigroup reported a net loss of $18.72 billion, or $3.88 per share. See Schedule C for full year business segment results.
The loss sharing program with the U.S. Government, closed on January 15, 2009, reduces risk and lowers the regulatory capital requirement on $301 billion of covered assets. Additionally, Citi closed on the issuance of $7.1 billion of liquidation preference perpetual preferred stock and warrants to the U.S. Treasury and FDIC.
On January 13, 2009, Citi announced the Morgan Stanley Smith Barney Joint Venture. Citi will exchange Smith Barney for a 49% stake in the JV and a $2.7 billion cash payment. Upon closing, expected to occur in the second half of 2009, this transaction will result in a pre-tax gain of approximately $9.5 billion (approximately $5.8 billion after-tax), an increase to tangible common equity of approximately $6.5 billion and an increase to Tier 1 capital of approximately $6.4 billion.
"Our results continued to be depressed by an unprecedented dislocation in capital markets and a weak economy. However, a number of our core customer franchises continued to perform well as Citi's customers remain active and engaged with us. We continued to make progress on our primary goal in 2008—which was to get fit. We significantly strengthened Tier 1 and structural liquidity, we reduced our balance sheet, expenses, and headcount. We also made significant progress in reducing risk from our balance sheet. Our legacy assets declined to approximately $300 billion, over $300 billion of assets are now covered by a loss sharing arrangement, and we added $14 billion to our loan loss reserves. We expect reduced volatility from marks in 2009 as a result of actions we've taken to reduce risk, and reclassify certain securities and loans from trading and available or hold for sale to hold to maturity or held for investment.
"Today, we announced that we would separate the company, for management purposes, into two separate businesses—Citicorp and Citi Holdings. We are setting out a clear roadmap to restore profitability and enable us to focus on maximizing the value of Citi and strengthening TCE.
"We are committed to helping the financial markets recover as quickly as possible. To accelerate that recovery Citi is putting the TARP capital it has received to work to support the U.S. economy and consumers - expanding the flow of credit to U.S. households and businesses responsibly and on competitive terms.
"I want to recognize the hundreds of thousands of Citi colleagues who have kept their focus on our clients and our business throughout what has been an enormously disruptive and distracting period in our industry. Despite unprecedented turbulence in the global financial markets, they have conducted themselves with the highest professionalism and integrity. Because of their work and dedication, I have no doubt we will emerge from the current environment stronger, smarter, and better positioned to realize the full earnings power of this great franchise," said Vikram Pandit, Chief Executive Officer of Citi.
Revenues declined 22%, driven by a 47% decline in investment sales, lower mortgage servicing revenue, the impact of foreign exchange, lower volumes and spread compression. The decline in investment sales was driven by a general slowdown in global capital market activities. Average loans and deposits were down 6% and 7%, respectively. Expenses declined 3%, as benefits from re-engineering efforts and the impact of foreign exchange more than offset $384 million in restructuring charges. Credit costs increased 23% or $1.1 billion, reflecting a significant increase in net credit losses, up $1.7 billion. Credit costs also included a $2.3 billion net loan loss reserve build, mainly in North America across all portfolios, including additional reserves for increased numbers of loan modification adjustments to customer loans across all product lines.
Corporate/Other revenues of $254 million were mainly driven by a $263 million pre-tax gain on sale of Citi Global Services Limited and effective hedging activities. The net loss of $421 million reflected higher expenses mainly due to restructuring charges, and higher taxes held at Corporate.
Discontinued operations income of $3.8 billion primarily reflected a $3.9 billion after-tax gain on the sale of Citi's German retail banking operations, including the fourth quarter impact of a benefit of a currency hedge put in place post-signing.
A reconciliation of non-GAAP financial information contained in this press release is on page 16.
Gary Crittenden, Chief Financial Officer, will host a conference call today at 8:00 AM (EST). 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. Dial-in numbers for the conference call are as follows: (877) 700-4194 in the U.S.; (706) 679-8401 outside of the U.S. The passcode for all numbers is 78218371.
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.