Citi claims net income this morning of $1.3 billion, but there were two large, offsetting charges that shaped this number.
1) - Citi’s earnings were also hit by a $1.1 billion charge related to the bank’s own debt. Citi debt rose in value during the fourth quarter as investors became more confident the company will be able to repay what it owes. However, accounting rules mean this positive development results in a charge against profit.
2) - Citi released $2.25 billion of loan loss reserves this quarter...which means that $2.25 billion was magically added to gross income.
So back out both charges, and Citigroup earned barely $150 million for the quarter, while J.P. Morgan earned $4 billion during the same 3 months. Ouch.
Also, the most important number is below - Citigroup set aside $24.4 billion for compensation and bonuses.
An insolvent bank paying $24.4 billion in bonuses...
Just another day in the U.S. Banana Republic...
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A Look Inside Citi's Numbers...
"I am very pleased that with our fourth consecutive profitable quarter, we earned $10.6 billion for the year,” Pandit said in a statement.
It’s always another excuse or shifting expectations at Citigroup. Handed a dismal quarter, Pandit’s focusing on a profitable year. The suggestion is that eking out a profit is the new standard for a too-big-to-fail bank that leans on the government and taxpayers.
- A more jaundiced look at Citigroup reveals that the bulk of its “profit” for 2010 was built on the release of loan-loss reserves, cash it was forced to set aside to gird against defaults. In the latest quarter, Citi released $2.25 billion. You can do the math: Without that amount released, Citi would have posted a loss of close to $1 billion.
Source - David Weidner - Marketwatch
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$24.4 Billion for pay and bonuses...
Compensation, the bank’s biggest expense, was $24.4 billion for the full year, down 2 percent from a year earlier, the company said in an earnings supplement. Citigroup had 260,000 employees at the end of 2010, up from 258,000 at the end of September, the first quarterly increase in three years.
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On the Call: Citigroup CEO Vikram Pandit
http://www.bloomberg.com/news/2011-01-18/on-the-call-citigroup-ceo-vikram-pandit.html
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Citigroup dividend? Not before 2012, CEO Vikram Pandit says
http://latimesblogs.latimes.com/money_co/2011/01/citigroup-dividend-payout-earnings-pandit-2012.html
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Citigroup Embroiled in `Mortgage Mess,': Tom Keene
“You just have this massive overhang of inventory on the banks’ and financial companies’ balance sheets,” Ritter said in a Bloomberg Radio interview on “Bloomberg Surveillance” with Tom Keene, referring to housing inventory. It’s “just going to continue to spill out into the market,” Ritter said.
http://www.bloomberg.com/news/2011-01-18/citigroup-embroiled-in-mortgage-mess-ritter-says-tom-keene.html
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