Citi: Profit plummets but tops estimates

Citigroup reported sharply lower, but better-than-expected, quarterly results Monday as gains in its international and wealth management divisions helped to temper sizeable subprime mortgage losses.

Citigroup shares gained 1.2 percent in premarket trading Monday.

New York-based Citibank said its net income fell 57 percent to $2.38 billion, or 47 cents a share, in the July through September period, from $5.5 billion, or $1.10 a share, a year earlier.


Analysts were widely expecting the banking giant to report net income of 44 cents per share.

Quarterly revenue also came in better-than expected, rising 6 percent to $22.7 billion from $21.4 billion a year earlier.

"It's in line with what they pretty much said," said Jamie Peters, an equity analyst with Morningstar. "The global business is still going strong, but it's the credit losses that are dragging down the results."

Citigroup chairman and CEO Charles Prince, who has faced much criticism from shareholders, labeled the quarter as "disappointing" but promised improvement going forward.

"As we move into the fourth quarter, we are focusing closely on improving those areas where we performed below expectation, while at the same time continuing to execute on our strategic priorities," Prince said in a prepared statement.

The two divisions hardest hit during the quarter were the company's markets and banking and alternative investments divisions, which saw their revenue tumble 24 percent and 63 percent, respectively, because of losses related to subprime mortgage securities, collateralized debt obligations and leveraged loans.

In an attempt to get ahead of possible criticism from investors, Citi announced Friday that it would combine the two units and appointed former Morgan Stanley (Charts, Fortune 500) exec Vikram Pandit to oversee the new division.

Citigroup closely-watched global consumer group, which includes its credit card, lending and consumer banking divisions, saw its overall revenue climb 14 percent during the quarter due to international growth, although its domestic revenues were flat, hurt by a decline in commercial lending.

Helping to offset some of the company's losses was its global wealth management division, as it reported revenue of $2.48 billion, a 44 percent jump over the year-ago period. Citi's international business also provided substantial revenue growth, as it rose 30 percent to $12.2 billion.

Citigroup also said its credit costs jumped to $2.98 billion as it took a charge of $2.2 billion to increase its loan loss reserves, while the company cited rising payment delinquencies by homeowners.

The overall results come two weeks after Citigroup warned that its quarterly results would fall by as much as 60 percent because of bad subprime bets and other problems.

At the time, Citigroup also announced it would take more than $3 billion in writedowns because of its exposure to subprime-backed mortgage securities and losses on leveraged loans.

Over the weekend, reports surfaced that Citigroup and a number of other big banks were planning to create a $100 billion fund that would purchase some of the troubled debt securities in an effort to prevent a fire sale of the assets.

Prince and the company's chief financial officer are slated to address analysts and investors at a conference call scheduled for 8:30 a.m. ET.

Citigroup is the first of four banks, including JPMorgan Chase (Charts, Fortune 500), Washington Mutual and Bank of America to report quarterly results this week.

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