The New Nation - Internet Edition

BSS, Dhaka

Citigroup Inc on Friday reported second quarter revenues of US$18.7 billion while Citi estimated a net loss for the 2008 second quarter of US $2.5 billion, based on 5,287 million shares outstanding.

The net loss was primarily due to fixed income write-downs and higher consumer credit costs in North America, according to an announcement made by Citigroup in New York, said a Citibank Bangladesh press release issued here on Friday.

But the results improved substantially from that during the first quarter of 2008 due to lower write-downs and good performance in the core franchise, it said.

Revenues during the second quarter were $18.7 billion, down 29 percent, largely driven by continued write-downs in Securities and Banking sub-prime related direct exposures in fixed income markets and a downward credit valuation adjustment related to exposure to monoline insurers. Revenues were stable across other businesses. The net interest margin increased 34 basis points versus first quarter 2008 to 3.18 percent.

Citi's operating expenses during the second quarter were $15.9 billion, up 9 percent, primarily due to $446 million in repositioning charges and the absence of a $300 million litigation reserve release recorded in the prior-year period.

Expense growth also reflected the impact of recent acquisitions. Expenses declined for the second consecutive quarter, due to continued benefits from re- engineering efforts. Credit costs of $7.2 billion primarily consisted of $4.4 billion in net credit losses and a $2.5 billion net charge to increase loan loss reserves.

Net credit losses increased $2.4 billion, primarily driven by residential real estate lending in North America and Global Cards. The incremental net charge to increase loan loss reserves of $2.0 billion was mainly due to residential real estate in North America.

The effective tax rate on continuing operations was 52.2 percent versus 29.8 percent in the prior-year period. The increase in the tax rate was due largely to higher tax rates in the jurisdictions where the losses were incurred.

During the current quarter, Citi further strengthened its capital position by issuing $4.9 billion of common stock and $8.0 billion of preferred stock. Tier 1 capital ratio was 8.7 percent at quarter-end.

"Despite the negative factors in the broader markets, we continue to see strong momentum throughout the organization with robust volumes in many of our products and regions," said Vikram Pandit, Chief Executive Officer of Citigroup Inc, according to a press release from Citibank Bangladesh.

"As part of our efforts to improve capital and balance sheet efficiency, we reduced legacy assets substantially during the quarter. We continue to be focused on building the strongest team by attracting world-class leaders to Citi and developing our current talent. This, combined with a sharp focus on customer relationships in all regions and an ongoing commitment to our strategic targets, will drive our earnings power going forward," said Pandit.