Citigroup Inc. - quarterly profit to plunge 60 percent
Citigroup Inc. said on Monday its quarterly earnings will drop 60 percent on $5.9 billion in losses and write-downs from subprime and leveraged loan woes, fixed income trading, as well as weakness in its consumer business.
The profit warning came on the same day that Swiss bank UBS AG disclosed $3.4 billion in losses, driven by some of the same factors, and raised questions about whether other banks that have not yet reported third-quarter results will also warn. Citigroup shares were up 2.4 percent despite the warning, after Charles Prince, the bank's embattled chief executive, said he expected the bank "to return to a normal earnings environment in the fourth quarter".
Among the principal culprits for the warning were $1.4 billion in pre-tax write-downs on loan commitments to unrated or junk-rated companies, known as leveraged loans. Citigroup also said it was taking $1.3 billion in pretax losses on the value of leveraged loans and subprime mortgage bonds it had planned to repackage into bonds called collateralized debt obligations.
And the bank had $600 million in losses on fixed-income trading, which Prince blamed on "significant market volatility and a breakdown in pricing relationships".