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Q3 Numbers: Merrill Lynch Reports $5.2B Losses, Citigroup Posts $2.8B

16 October, 2008

Citigroup, the biggest US bank by assets reported $2.8 billion (or $0.60 per share) losses in the third quarter, after getting hit by credit losses, reserves for bad loans and write-downs for mortgage-related securities. To add to this, Merrill Lynch also reported a net loss from continuing operations for the third quarter of 2008 of $5.2 billion, or $5.58 per diluted share.

These results are bound to bring down the US markets, and subsequently the Asian and European market. The BSE and NSE both closed down by 2.11%.

Citigroup Results

Results included $4.4 billion in net pre-tax write-downs in Securities and Banking, $4.9 billion in net credit losses, and a $3.9 billion net charge to increase loan loss reserves. The bank also said that it has slashed approximately 11,000 jobs in this quarter, totaling 23,000 job cuts this year. This is the fourth consequent loss that has been reported by Citigroup.

“While our third quarter results reflect both a difficult environment as well as continued write-downs on our legacy assets, we are making excellent progress on the parts of our business we control, including expense reduction, headcount, and balance sheet and capital management. We expect these improvements will enable us to realize the full earnings power of our franchise as the economy stabilizes,” said a hopeful Vikram Pandit, Chief Executive Officer of Citi, in a release.

Citigroup is also selling off some its businesses to strengthen its balance sheet. Earlier this year it sold off its German retail banking unit to France’s Credit Mutuel for $7.7 billion. It has sold its captive BPO arm Citigroup Global Services (CGSL) for $505 million. It has also put Citicorp Finance on the block in India. Citicorp Finance has a $1 billion commercial vehicle & construction equipment loan portfolio and Citi expects to sell it for Rs 850 crore. There were also reports of Citi mulling a stake sale in HDFC bank.

Merrill Lynch Results

Merrill Lynch, which last month accepted a takeover bid from Bank of America, has posted losses of $5.2 billion. Till now the investment bank had reported losses of $52 billion. Merrill Lynch has sold off quite a few of its assets this quarter. It reported a net pre-tax gain of $4.3 billion from the previously announced sale of the 20% ownership stake in Bloomberg. The firm also sold a $30.6 billion portfolio of toxic securities to private equity firm Lone Star Funds.

Merrill Lynch reported net write-downs of $5.7 billion resulting from the previously announced sale of U.S. super-senior ABS CDOs and the termination and potential settlement of related hedges with monoline guarantor counterparties.

“We continue to reduce exposures and de-leverage the balance sheet prior to the closing of the Bank of America deal,” said John A. Thain, chairman and CEO of Merrill Lynch. “As the landscape for financial services firms continues to change and our transition teams make good progress, we believe even more that the transaction will create an unparalleled global company with pre-eminent scale, earnings power and breadth.”

With BoA’s acquisition of Merrill Lynch, Thain is being considered as the obvious succession choice for present BoA CEO Ken Lewis. 


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Q3 Numbers: Merrill Lynch Reports $5.2B Losses, Citigroup Posts $2.8B

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