Citigroup Reports Loss on $15 Billion of Credit Costs (Update1): “Citigroup Inc., the biggest U.S. bank by assets, posted its second straight quarterly loss on at least $15 billion of writedowns and increased loan losses as customers fell behind on home, car and credit-card payments.
The first-quarter net loss of $5.11 billion, or $1.02 a share, compared with earnings of $5.01 billion, or $1.01, a year earlier, New York-based Citigroup said in a statement. While the loss was worse than the $4.75 billion predicted by analysts in a Bloomberg survey, revenue exceeded their estimates. The shares climbed 6 percent to $25.46 in early New York trading.”
So C missed. But since it wasn’t an apocalyptic report, the broader markets are in rally mode. With revenue down 48% and $39 billion in write-downs booked, can it possibly get any worse?
“The bank cited increased delinquencies on mortgages, unsecured personal loans, credit cards and auto loans, amid “trends in the U.S. macroeconomic environment, including the housing market downturn and rising unemployment.””
Actually it can. The losses on mortgages are far from over as housing prices are expected to continue to drop. The losses on unsecured personal loans, credit cards and auto loans are just now beginning to accelerate.
While the Bulltards are cheering, Moodys and Fitch have quickly and quietly snuck in some downgrades on C.
Fitch lowered C to AA- with a NEGATIVE outlook.
Fitch cut Senior Unsecured Debt to AA- from AA
Fitch cut Long Term IDR to AA- from AA
Fitch also believes that selling the frozen buyout loans that C has on its balance sheet won’t free up capital. Probably because C would have to finance the damn deals themselves and foot the first few losses to get a sale done.
Fitch downgraded Citigroup’s Individual Rating from A to A/B.
The ratings explained here:
A very strong bank. Characteristics may include outstanding profitability and balance sheet integrity, franchise, management, operating environment or prospects.
A strong bank. There are no major concerns regarding the bank. Characteristics may include strong profitability and balance sheet integrity, franchise, management, operating environment or prospects.
An adequate bank, which, however, possesses one or more troublesome aspects. There may be some concerns regarding its profitability and balance sheet integrity, franchise, management, operating environment or prospects. D denotes:
A bank, which has weaknesses of internal and/or external origin. There are concerns regarding its profitability and balance sheet integrity, franchise, management, operating environment or prospects. Banks in emerging markets are necessarily faced with a greater number of potential deficiencies of external origin.
A bank with very serious problems, which either requires or is likely to require external support.
A bank that has either defaulted or, in Fitch’s opinion, would have defaulted if it had not received external support. Examples of such support include state or local government support, (deposit) insurance funds; acquisition by some other corporate entity or an injection of new funds from its shareholders or equivalent.
Gradations may be used among the five ratings: i.e. A/B, B/C, C/D, and D/E.”
Moody’s affirmed C’s ratings, but changed the outlook to NEGATIVE.
While equities are throwing a mini-party this morning, LIBOR is spiking hard again. The financial system is under HUGE stress.
The Eurodollar front month is getting absolutely smashed as LIBOR continues to spike. All technical levels have been destroyed. The front month is pricing in a 75 basis point hike now. Fun times.
I will repeat that. RATE HIKES. Not cuts.
Those of you thinking:
WTF is LIBOR?
WTF is a Eurodollar?
Start reading. Start learning. This is about to become the next big thing…
The TED Spread, LIBOR and EURIBOR = Scary Bad
Mortgage Insurers (Quietly) Downgraded: CDS Spreads Scream Trouble