10-QPeriod: Q1 FY2008

CITIGROUP INC Quarterly Report for Q1 Ended Mar 31, 2008

Filed May 2, 2008For Securities:CC-PNC-PR

Summary

Citigroup Inc. reported a significant net loss of $5.11 billion, or $1.02 per diluted share, for the first quarter of 2008. This loss was primarily driven by substantial write-downs and losses stemming from disruptions in the fixed-income markets and increased U.S. consumer credit costs. Revenues were down 48% year-over-year to $13.2 billion, impacted by $13.4 billion in write-downs and credit costs, including $6.0 billion related to subprime direct exposures, $3.1 billion on highly leveraged financing commitments, and $1.5 billion related to monoline insurers and auction rate securities. Despite the significant net loss, the company highlighted strong performance in its international consumer businesses, with revenues up 33%, and international Global Wealth Management revenues more than doubling, driven by organic growth and the acquisition of Nikko Cordial. The company also raised capital through preferred stock issuances, enhancing its Tier 1 Capital ratio to 7.74%. Management also noted proactive steps taken to bolster liquidity, including reducing commercial paper outstanding and increasing parent company liquidity portfolios. The company announced a comprehensive reorganization to enhance client focus and efficiency. While the results reflect the ongoing impact of challenging market conditions, particularly in fixed income and subprime-related exposures, the international and transactional businesses showed resilience, and capital ratios remained strong.

Key Highlights

  • 1Net loss of $5.11 billion ($1.02 per diluted share) for Q1 2008, a significant decline from a net income of $5.01 billion in Q1 2007.
  • 2Revenues decreased by 48% year-over-year to $13.2 billion, heavily impacted by substantial write-downs and credit costs totaling over $13 billion.
  • 3Significant write-downs included $6.0 billion on subprime-related direct exposures and $3.1 billion on highly leveraged financing commitments.
  • 4International Consumer revenues increased 33% and International Global Wealth Management revenues more than doubled, driven by acquisitions and organic growth.
  • 5Operating expenses increased 4% year-over-year, partly due to repositioning charges and acquired businesses, but were down 2% from the prior quarter.
  • 6Common stockholders' equity decreased by 10% to $108.8 billion, reflecting the net loss and dividend payments.
  • 7Citigroup maintained a 'well-capitalized' position with a Tier 1 Capital Ratio of 7.74%, and took steps to raise additional capital, including preferred and common stock issuances, which would improve the pro forma Tier 1 ratio to approximately 8.7%.

Frequently Asked Questions

The significant net loss of $5.11 billion was primarily caused by substantial write-downs and losses related to continued disruptions in the fixed-income markets and higher U.S. consumer credit costs. This included $6.0 billion in write-downs on subprime-related direct exposures, $3.1 billion on highly leveraged financing commitments, and $1.5 billion on exposures to monoline insurers and auction rate securities.

While the Markets & Banking segment reported a significant net loss of $5.67 billion due to the aforementioned write-downs, the Global Consumer segment showed resilience with net income of $1.43 billion, driven by strong performance in International Consumer (+33% revenue growth) which offset a large decline in U.S. Consumer net income. Global Wealth Management also saw revenue growth, up 16%.

Citigroup reported taking proactive steps to bolster liquidity by reducing commercial paper outstanding and increasing liquidity portfolios. Additionally, the company announced a comprehensive reorganization and raised significant capital through preferred and common stock issuances. These actions were aimed at strengthening its capital base and improving operational efficiency.

The subprime crisis significantly impacted Citigroup's 'Securities and Banking' segment, leading to substantial write-downs on subprime-related exposures, highly leveraged loans, and certain other mortgage-related securities. The company held approximately $29.1 billion in net U.S. subprime-related direct exposures at March 31, 2008, primarily in the super senior tranches of collateralized debt obligations.