Friday, July 18, 2008

Citis's second quarter better than feared

Citi's second quarter earnings results were bad but not as bad as expected. NA Consumer banking in res. real estate net credit losses were $1.09 billion up from $216 million a year ago. Loans 90+ DPD were at $6.46 billion up from $2.91 billion a year ago (loan losses are also higher sequentially). CRE loans net credit losses were only $16 million, 33% lower than a year ago. Auto loan delinquencies (90+ DPD) were 51% higher at $265 million compared to $176 million a year ago. Net credit losses at Personal loans & other were 63% higher at $444 million from $273 million a year ago (credit losses in this category are also up sequentially). Loan delinquencies in this category are 45% higher compared to a year ago.
click to enlarge

Consumer loan delinquencies by region were at $9.03 billion (2.43% ratio) in NA and $840 million (1.17% ratio) in EMEA (Europe, Middle East and Africa). Net credit losses were at $2.45 billion (2.55% ratio) and $431 million (2.49% ratio) in NA and EMEA respectively. The biggest contributor was consumer banking with net credit losses of $1.76 billion (2.33% ratio) and $266 million (2.51% ratio) in NA and EMEA respectively. Global Cards net credit loss ratio was 6.46% or $687 million in NA and only 3.9% or $166 million in EMEA.

click to enlarge

Institutional clients group (ICG) saw debt underwriting reporting a loss of $277 million substantially less than $2.08 billion loss reported in the first quarter of 2008. Fixed income reported a loss of $633 million that is substantially less than $7.023 billion in the first quarter of 2008 and $16.105 billion loss reported in the fourth quarter of 2007. Write-downs in the fixed income segment were $3.4 billion on subprime related direct exposure, $2.4 billion related to exposure of monolines and an additional write down of $0.5 billion on CRE positions. Off setting the steep write-downs were record revenues in interest rates, currency and commodities, mainly oil, the company stated during the conference call.
click to enlarge

Fixed income reported a loss of only $633 million despite a combined write-down in this segment of $6.3 billion! underscoring the off setting effect of commodities trading. This is a direct result of an accommodative Federal Reserve, and there is little hope for change as long as this dynamic of massive loan corrections continues. This is my base case for higher commodity prices over the near to medium term.

source: Second Quarter 2008 Earnings Review

Citi, July 18, 2008

No comments: