Citigroups' losses smaller than expected by Livia Cseresova

The loss of Citigroup in second-quarter was smaller than expected. The bank lost $2.5 billion, which calmed downed the Wall Street worries about financial sector.

Citigroup's rising of 8 percent on Friday helped to lift some other financial stocks and is convincing investors that the prognosis might not be as terrible as thought.

However, it isn't easy to be very enthusiastic, because this was Citigroup's third quarterly loss in a row and it doesn't look too good with JPMorgan or Wells Fargo either.

Also, Merrill Lynch & Co. reported a bigger quarterly loss as was expected. And Wachovia Corp. and Washington Mutual Inc. are expected to reveal losses next week too.

But to return to Citigroup, the largest banking company of the U.S. lost the equivalent of 54 cents per share in the period of April-June. In the same time period a year ago, Citigroup earned $6.23 billion, which is $1.24 per share.

According to Thomson Financial, the shortfall was milder than the 66 percent per share loss expected by analysts.

The value of Citigroup Inc.'s assets before taxes is $7.2 billion, and an asset revaluation cost its consumer lending business is $745 million, according to its securities and banking division. This is much lower than it was in this years' first quarter and last years' last quarter.

But credit costs jumped to $7.2 billion as more consumers defaulted on their loans. This $7.2 billion credit costs includes $4.4 billion in credit losses and a $2.5 billion charge to bulk up reserves for future loan losses.

Just like other banks, Citigroup is also bracing for mortgages and credit cards to bring more hefty losses. As the Chief Financial Officer Gary Crittenden said, credit card loss rates could increase to their highest levels ever soon. He also said Citigroup's credit card exposure at the moment includes more risky, but higher-yielding, cardholders than in former downturns.

Citigroup hasn't profited for three quarters in a row, losing $17.4 billion during that period. Its shares have fallen 65 percent over the past year, and recently hit their lowest point since October 1998.

Mike Mayo, analyst of Deutsche Bank said the Citigroup's credit quality is not very different from its peers, and that its revenues were stronger than he expected and this should help Citi turn a profit soon.

The bank has raised about $40 billion in past months by lowering its dividend and selling stock. And during the second quarter, Citi lopped off $99 billion from its total assets, currently standing at $2.02 trillion.

by Livia Cseresova for PocketNews (http://pocketnews.tv)

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edited by BEata Biskova