Citi posts loss, cuts 9,000 more jobs

Financial services giant records $5.1 billion loss and more than $15 billion in writedowns, and says it will eliminate more positions.

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By David Ellis, CNNMoney.com staff writer

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NEW YORK (CNNMoney.com) -- Citigroup delivered yet another quarter of devastating results Friday, this time losing more than $5 billion due to troubles in its fixed-income business and higher consumer credit costs, adding it would cut an additional 9,000 jobs.

The New York-based company also recorded more than $15 billion in writedowns, with the lion's share coming from subprime-related direct exposures.

But investors cheered the news, sending shares of Citigroup (C, Fortune 500) more than 6% in early trading, as the results were not as bad as some had feared.

During a conference call with analysts, Citigroup's Chief Financial Officer Gary Crittenden said the company would initiate another 9,000 job cuts across the firm during the coming year. That's on top of the 4,200 cuts announced during the previous quarter.

For the quarter, Citi's losses widened to $5.1 billion, or $1.02 per share, surpassing Wall Street's expectations. Just a year ago, the financial services giant booked a profit of just over $5 billion.

Citi, however, did surprise analysts by delivering better-than-expected top line growth. The company said revenue rose sharply to $13.22 billion from the previous quarter, still it remained at just about half of what it was a year ago.

Analysts were expecting the company to report a loss of 95 cents a share on revenue of $12.77 billion, according to analysts surveyed by earnings tracker Thomson Financial.

At the same time, Friday's results paled in comparison to the eye-popping $9.83 billion quarterly loss the company suffered three months ago - the worst ever recorded in the 196-year-history of the firm and its predecessors.

Citigroup CEO Vikram Pandit said he was not happy about the results, but noted that he believed that efforts to cut costs, sell non-core businesses and beef up risk management would pay off.

"I think you will see we are taking all the action you'd want us to take to maximize the value of this franchise," said Pandit.

Since Pandit's ascension to the CEO post in December, management has made great strides in shaping up what some critics have called the company's bloated corporate structure.

On Thursday, Citi announced it would sell its commercial lending and leasing business to General Electric for an undisclosed amount. The company has also announced other major moves including the sale of Diners Club International and its stake in Brazilian credit card company Redecard SA.

A closer look

Dragging down Citi's results was the company's markets and banking division, which recorded a $4.48 billion loss due to substantial writedowns.

Among them: a $6 billion on its subprime exposures; a $1.5 billion adjustment related to its exposure to bond insurers; a $1.5 billion writedown on auction rate securities; a $1 billion writedown on Alt-A mortgages and a $600 million writedown on its commercial real estate portfolio.

The company was also forced to take a writedown worth $3.1 billion on its leveraged loan commitments.

Citi's wealth management and its global consumer group, which includes the company's retail banking and credit card businesses, also reported a decline in earnings, hurt by rising credit costs.

All totaled, the company recorded a $3.1 billion increase in credit costs in that division as consumers had a more difficult time keeping up with their mortgage, credit card and car payments - at a time when unemployment is on the rise and the broader U.S. economy has slowed substantially.

Crittenden warned that if those troubles persisted, it could pose a "significant headwind" going forward.

"We believe consumer credit costs could have a meaningful impact on our results for the remainder of the year," said Crittenden.

Those concerns, in addition to the company's losses, prompted Fitch Ratings to downgrade Citigroup one notch to 'AA-' from 'AA', adding that it remained vulnerable to additional downgrades given the tough outlook for U.S. consumer and the company's existing exposure to risky mortgage-related investments.

Citigroup's results wrap up what has been a particularly tough week of results for the nation's largest financial firms.

On Thursday, Merrill Lynch (MER, Fortune 500) recorded a loss of $1.96 billion, after about $6.6 billion in new writedowns. The company also said it planned to cut about 3,000 more jobs.

Wachovia Corp. (WB, Fortune 500) surprised Wall Street Monday with a first-quarter loss of $350 million, while Washington Mutual (WM, Fortune 500) reported a loss of $1.1 billion, or $1.40 a share, on Tuesday.

JPMorgan Chase (JPM, Fortune 500) topped Wall Street expectations after reporting earnings of $2.4 billion. Still the results were just half of what they were a year ago.

Bank of America Corp. (BAC, Fortune 500) is expected to turn in a weak performance when it reports its results Monday. To top of page

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