When will Citigroup make money again?

Amy Scott Jan 19, 2010
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When will Citigroup make money again?

Amy Scott Jan 19, 2010
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Kai Ryssdal: I suppose it’s a sign of just how bad things were when a bank reports a multi-billion dollar loss and its stock goes up. Citigroup announced this morning it lost more than $7.5 billion in the final months of 2009. And yet shares gained more than 3.5 percent today. Most of that red ink — it ought to be said — actually came from paying the bailout money back to the federal government. And Citi said losses from bad consumer loans are starting to stabilize.

So, less bad news clearly being a good thing, traders decided today’s report was reason enough to buy Citi shares. Oh, but when might Citi might start making money again? We asked Marketplace’s Amy Scott to look into that.


AMY SCOTT: Even if you don’t count the cost of repaying bailout money, Citigroup still lost more than a billion dollars last quarter. But its stock jumped 3.5 percent today. Investors may have been heartened by cautious words from CEO Vikram Pandit that losses from bad loans are showing signs of improvement.

VIKRAM PANDIT: Some credit fundamentals appear to be stabilizing, particularly internationally. But U.S. consumer credit remains an issue.

Analyst Jamie Peters with Morningstar didn’t see much to cheer about.

JAMIE PETERS: My opinion is that people are simply heaving a sigh of relief that Citigroup did not come over and slam somebody with an unexpected charge.

Citigroup actually turned a profit three out of four quarters last year.

But Gerard Cassidy with RBC Capital Markets says that was mostly from selling off assets as the bank tried to downsize. He says as the lending environment recovers, Citi should start really making money again this year.

GERARD CASSIDY: Like any bank recovery we have to crawl before we walk, and you have to see a deceleration in the credit deterioration before you actually see an improvement. But we expect in the first quarter of 2010 for some banks to actually start to show improvement in credit.

Investors will get a better idea of when that might be when Bank of America and Wells Fargo report their earnings tomorrow. But even if credit conditions improve, banks say they won’t be able to make as much money on consumer debt. They say they’ll lose hundreds of millions of dollars when changes from new credit card legislation take effect next month.

In New York, I’m Amy Scott for Marketplace.

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