Citigroup Expects Significant Downturn in Third-Quarter Income
Due to "dislocations in the mortgage-backed securities and credit markets, and deterioration in the consumer-credit environment, Citigroup expects to see a slump of about 60% in third-quarter net income from a year earlier.
In 2006, third-quarter earnings were $5.51 billion, or $1.10 a share. The mean estimate of analysts surveyed by Thomson Financial was for earnings for the quarter ended Sunday of $1.09 a share.
"Our expected third-quarter results are a clear disappointment. The decline in income was driven primarily by weak performance in fixed-income credit market activities, write-downs in leveraged loan commitments and increases in consumer-credit costs," stated Chairman and Chief Executive Charles Prince.
The Citigroup announcement came on the heels of Swiss financial-services giant UBS AG’s report that it will post a third-quarter loss in after making more than 4 billion Swiss Francs ($3.44 billion) of write-downs in its fixed-income portfolio.
Regarding Citigroup, Mr. Prince called the company's fixed-income trading results "an aberration. While we cannot predict market conditions or other unforeseeable events that may affect our businesses, we expect to return to a normal earnings environment in the fourth quarter."
Including in the third-quarter results will be an estimated $1.4 billion in pretax write-downs on leveraged buyouts it is helping to finance, about $1.3 billion in pretax losses on sub-prime mortgage-backed securities and some $600 million in pretax losses on fixed-income trading.
Additionally, consumer-credit costs will be some $2.6 billion higher on a pretax basis largely due to increased loan-loss reserves. Citigroup intends to release its third-quarter results on Oct. 15.
Published on October 1, 2007
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