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My Two Cents

Citigroup Earnings Are Worrisome

Chris Farrell Jul 20, 2008

The stock market staged a stong sigh-of-relief rally on friday on news that Citigroup’s $2.5 billion dollar loss was better-than-expected.

But I didn’t take much solace in the news. The growing losses in credit cards is worrisome. From today’s Wall Street Journal.

A similar trend is evident in Citigroup’s giant credit-card business. Defaults in North America rose in the second quarter to 6.53% of total loans from 5.81% three months earlier. That’s the highest loss rate since mid-2005, when a wave of borrowers rushed to file for bankruptcy protection before a new law took effect that made it harder for them to wipe away their debts.

Mr. Crittenden [Citigroup’s CFO] warned that credit-card losses could rise “beyond their historic peaks” of about 7%, a level last seen in early 2004.

The credit problems continue to spread.

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