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Citigroup Loses $7.8 Billion in the Fourth Quarter

Citigroup was the hardest hit among the biggest US banks after it reported a loss of $7.6 billion in the fourth quarter of 2009. The losses can mainly be attributed to the cost of repaying $20 billion worth of government bailout as well as failed loans. Despite the significant losses, Citigroup plans to give its top executives large bonuses.

Citigroup’s Diminished Stature

The report released on Tuesday reveals what analysts’ suspected all along. It also highlights the banks’ struggles as well as its diminished stature in the banking sector. Along with other big lenders, the bank was also forced to set aside $8.18 billion as coverage for the loans their clients can’t repay. Unlike its major competitors though, Citigroup no longer has enough buffer against losses because it has shed its brokerage and investment banking unit during the crisis.

Right now, the company has no choice but to concentrate on loans which isn’t a large money-maker due to the uncertainty today. While worrying, John Gerspach, the bank’s chief financial officer, said that credit card loans and mortgage loans that are delinquent are starting to stabilize. This provides a lot of hope for the company. Gerspach added that “the US credit store is still very much developing.”

However, an analysis by Alois Pirker from Aite Group said that Citigroup is in a “higher risk position” because it is trying to compete with other big banks its size without its investment banking unit or trading operations.

JPMorgan Chase and Others Still Cautious

Citigroup’s report contrasts sharply with JPMorgan Chase & Co when it reported an earning of $3.28 billion during the same quarter. This growth can be attributed to its investment banking unit. JPMorgan also reported that it has set aside $7.28 billion as coverage for failed loans. Company executives added that it is unsure whether it will be able to stop adding to this reserve.

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Category: Banking


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