Bloomberg News
reports that Citigroup Inc. (NYSE: C) lost $5.11 billion in the first quarter. This was worse than analysts had expected and was its second straight quarterly loss on at least $15 billion of writedowns and increased loan losses as customers fell behind on home, car and credit-card payments. Specifically, Citigroup's loss of $1.02 per share is the opposite of its profit of $5 billion, or $1.01 per share, in the first three months of 2007. Analysts were expecting a loss of 95 cents per share.
But it looks like Citi is doing something about the problem. Bloomberg News reports that Citi plans to cut costs by as much as 20%. It cites a Financial Times story that quoted CEO Vikram Pandit as saying: "It is clearly feasible for Citigroup to take 10, 15, 20 percent off its cost base, especially in information technology and operations." The cuts would include job losses among Citi's 370,000 employees.
And although its revenue plunged 48% to $13.2 billion, Citi beat analysts' expectations of $11.1 billion. Investors seem to be cheering the news about the cost cuts and the lower than expected drop in revenues. Citi is up 8.8% in pre-market.
Peter Cohan is President of Peter S. Cohan & Associates. He also teaches management at Babson College and edits The Cohan Letter
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Reader Comments (Page 1 of 1)
4-18-2008 @ 6:20PM
NewsVisual said...
Citigroup Inc reported on Friday that it sustained a net loss for the 2008 first quarter of $5.1 billion and that it took $6.0 billion in pre-tax write-downs as a consequence of sub-prime mortgage losses. “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,” Citi CEO Vikram Pandit. Mr Pandit then sought to reassure investors that Citi is not entering into a period of permanent decline by adding the following comments: “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.” This statement, however, might not go far enough to satisfy the demands of angry shareholders, especially large institutional investors, for accountability from the bank’s Board of Directors. Just this past week, shareholders of Washington Mutual Inc forced the resignation of one WaMu Director and they were nearly successful in voting down the reelection of several other Directors to the WaMu board. The strife at WaMu could portend a similar fight at Citi.