Citibank Warns Of 60% Drop In Earnings Due To Subprime Meltdown

Citibank is warning investors to expect a 60% drop in earnings due to “dislocations in the mortgage-backed securities and credit markets, and deterioration in the consumer credit environment.”

Ouch.

“Our expected third quarter results are a clear disappointment. The decline in income was driven primarily by weak performance in fixed income credit market activities, write-downs in leveraged loan commitments, and increases in consumer credit costs,” said Charles Prince, Chairman and CEO of Citi.

Thankfully, Citi has a plan to fix the problem. Free burritos for college students! Yes! This is foolproof.


Citi Expects Substantial Decline in Third Quarter Net Income (Press Release)
[Citi]
(Photo:cmorran123)

Comments

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  1. esqdork says:

    Was 60% of their revenues really derived from sub-prime mortgage-backed securities? Or are they buring some other problems in their revenue stream and blaming it on the sub-prime meltdown?

  2. ColoradoShark says:

    @esqdork: 60% of “earnings” as in profits. Very different than revenues. Those wacky bankers love to confuse you.

    And I bet they are doing what your cynical self just said and are trying to bury all their other bad decisions under the sub-prime headstone.

  3. MonkeyMonk says:

    And yet the stock is up 3% in trading today. I so don’t understand the stock market sometimes. Maybe investors are counting on all those additional cards from Macys customers to bail them out.

  4. nffcnnr says:

    @MonkeyMonk: The stock junkies know that a mass lay-off is in the near future – that always seems to make a company’s stock go up.

  5. fredmertz says:

    Stocks move based on news relative to expectations. A bad result when people expected worse is positive. In this case, people have been worried about the impact of the sub-prime issue and now it has been quantified — investors hate uncertainty and now that uncertainty has been removed.

  6. 3drage says:

    I just paid off my citi card, and will never charge another balance on it so long as I live. Although I’m not completely debt free (damn you college!), I’m close enough so that it feels good to not have huge monthly payments.

  7. Chicago7 says:

    Citibank had RECORD earnings for 2006, though.

    Record Revenues of $23.8B, up 15%
    Net Income from Cont. Ops. of $5.1B, up 3%
    EPS from Cont. Ops. of $1.03, up 5%
    Return on Common Equity of 17.2%

    It would have been difficult to match that, even in a great economy. 2006 was the year that saw those unbelievable bonuses for everybody in finance.

  8. mad_oak says:

    What B.S. There total writeoff isn’t even going to cut into the red. They are going to make less profit in 1 quarter to write off their subprime losses. Big frickin deal. Thats like me saying I’m going to save 60% less for 3 months because I have a big car repair bill. I’m still saving… and now my car is fixed.

  9. synergy says:

    I think I read this morning somewhere that the stock market is up in anticipation of another Fed rate cut.

    I can’t wait for my dollar to go further in the toilet!