Banking News: Citibank (NYSE: C) Earnings Disappoint Shareholders and Analysts
Citibank (NYSE: C) disappointed investors, shareholders and industry analysts when they announced their disappointing third-quarter earnings which were significantly hindered by non-performing loans.
Citibank earned a slim profit of $101 million, but common stockholders endured a loss of 27 cents per share because most of the profit was paid back to the government in dividends for its investment as part of the various bailouts that Citibank has received.
Although the results that Citibank posted were a bit better than analysts’ expectations, Citibank shares fell sharply on Thursday and Friday. At the end of trading on Wednesday, Citibank was trading at $5.00 per share, but by Friday afternoon, the price had declined to $4.63, representing a 9.2% drop in value.
Investors were looking for more signs that the economy is finally turning around, but the upbeat pictures that the banking industry is painting are far from reality. Although JP Morgan Chase and Goldman Sachs announced much better than expected financial results, they were largely due to investments and underwriting, not consumer products.
“While consumer credit trends are improving in international markets, the U.S. consumer credit environment remains challenging,” said Vikram Pandit, chief executive officer of Citigroup in a statement.
Earlier in the week, JPMorgan Chase indicated that it expected increased losses from consumer loans, such as home equity loans, credit cards and mortgages by allocating $2 billion of its profit to take care of their expected losses. Citibank said that their total losses from consumer were a whopping $8 billion. Citibank also increased its expected losses for the fourth quarter by $800 million.
If there’s any good news from Citigroup’s earnings announcement, it’s that its customers are continuing to save. During the third quarter, Citibank customers added more than $28 billion in deposits to the bank. Citibank reported that their global deposits reached $833 billion as of August, 31st.
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Great post but complicated to understand since I am from Faroe islands ;-) 
What would be your top three tips for anyone new to this topic?
The banking sector would not improve until banks understand good and bad credit more diligently. In my opinion, the current credit models do not provide banks with correct picture of credit for a large number of individuals who are potential customers. Due to the weak economy, Banks have become overstrict than needed such that even a large % of genuine Americans do not get credit.
The risk taking aptitude has to revive with banks constructively. Banks and Government need to invest more in credit risk estimation models and hire firms/inidviduals that can provide more accurate, more sophisticated credit risk models as per current economic situation than current old credit rating models.
Mr Pandit or Mr Lewis or others can keep giving statements about how challanging it is currently, but reality is there needs to happen revolutionary changes in american credit rating system.
Wall street just proves their mistrust for their analysts' estimates. Whats the point of all these analysts working so hard publishing their estimates, when the street is only going to look at the final number and make irrational decisions?
Actually, it was providing Americans with too much credit that got us into this mess in the first place. Americans were running on more credit than they could actually afford, which lead to the inability to pay back their loans and finally a crash of the system. It is natural that banks will become more stringent after the severe losses they incurred from all of the loans they were giving out (practically to anyone with a job). I agree that banks should eventually loosen their credit policies but in the fragile state the banking sector is in, banks should be careful with who they are loaning money out to and for what purpose. We cannot afford another case of Indymac.
It is basically very simple.
1. Jobs have been exported out, that has increased joblessness.This was done to increase the Company profits so that the CEO's and the other executives could cash bonuses.
2.With large number of jobs disappearing and the paycheck disappearing, the American Consumer does not have the buying power it once had.
To enrich a few we have weakened the overall system.
3. The Country was duped with excessive flow of credit. The Politicians and the Bankers let it happen to meet their own goals.
4. The problem is more fundamental than Analysts. Travel is a good eye opener. I travel excessively for the last 40 years. I saw the glory that was USA, and I see the same signs in Asian Countries now, that I saw in US in 1960's.
WOW, 29.99. I can *not* imagine who would use that unless they were desperate, poor sob, like lost job, no health insurance, can't buy food, hanging on by fingernails. Unfortunately, lots and lots of people in that situation in the USA today. Does anyone believe that unemployment is less than 10 percent today? Not me, its gotta be 20 percent. Millions of folks lost union auto worker jobs, can't find anything to replace their job, and no longer considered unemployed.
Why would you, or anyone, deal with Citibank now anyways? You're just paying for their stupidity through your own bank fees – you paid the government your taxes, which they lent to Citibank, and now you're paying Citibank to repay those loans with interest. So you've just cleared Citibank of any financial responsibility and you're making the government money which they can waste on any moronic pork-laden socialist bill they want to pass.
Look at the positive side guys atleast it is not making losses
Look at the positive side guys atleast it is not making losses
Look at the positive side guys atleast it is not making losses