Citigroup Earns USD4.3 Billion In Q2
Citigroup Inc. reported net income for the second quarter of 2009 of USD4.3 billion, or USD0.49 per diluted share. Second quarter revenues were USD30.0 billion. These results include an USD11.1 billion pre-tax (USD6.7 billion after-tax) gain associated with the Morgan Stanley Smith Barney joint venture transaction, which closed on 1 June 2009.
The results reflect Citigroups previously announced realignment into two principal segments, Citicorp and Citi Holdings. A third segment, Corporate/Other, consists of various corporate level activities.
Key Items
-Closed Morgan Stanley Smith Barney joint venture transaction on 1 June 2009, ahead of schedule.
-Total revenues were USD30.0 billion, up USD12.4 billion from the second quarter of 2008, due primarily to the Smith Barney gain on sale and favorable net write-ups and gains (revenue marks) relative to the prior year period in Citi Holdings, partially offset by the impact of foreign exchange changes on non-U.S. dollar items as they are converted to U.S. dollars for reporting purposes (the impact of foreign exchange) and declines in Regional Consumer Banking revenues, primarily in Cards.
-Managed revenues were USD 33.1 billion, or USD 22.0 billion excluding the Smith Barney gain.
-Institutional Clients Group had net income of USD 2.8 billion, up 17% from prior year levels on record net income from Transaction Services, and strong results in Securities and Banking.
-Regional Consumer Banking deposits grew in each region versus the prior quarter, with particular strength in North America, where deposits grew 6%.
-Total deposits were USD 805 billion, up 6% sequentially, and flat with prior year levels.
-Net interest margin was 3.24%, up 7 basis points from the prior year period as the benefit of lower cost of funds was largely offset by lower asset yields and the FDIC special assessment of USD 333 million.
-Credit costs increased to USD 12.4 billion, including an addition of USD 3.9 billion to loan loss reserves, bringing the total allowance for loan losses to 5.6% of total loans.
-Operating expenses were USD 12.0 billion, down 21% from the second quarter of 2008, reflecting ongoing re-engineering efforts, expense control, and the impact of foreign exchange.
-Headcount declined by approximately 30,000 from the first quarter of 2009, to 279,000, mainly driven by the Smith Barney transaction. Headcount is now approximately 96,000 below peak levels. June was the 20th consecutive month of headcount decline.
-Capital position continued to improve during the quarter. Tier 1 capital ratio was approximately 12.7%, versus 8.7% in the second quarter of 2008 and 11.9% in the first quarter 2009. Tangible common equity grew by USD 9.1 billion during the quarter.
-Since the beginning of 2007, Citi has worked successfully with approximately 625,000 homeowners to avoid potential foreclosure on combined mortgages totaling more than $67 billion.
For many quarters we have been consistently and successfully executing our plan to build financial strength and return Citi to sustained profitability and growth. We have made significant progress in recent quarters as evidenced in the significant decline in expenses, headcount, assets, including Citis riskiest assets, as well as our 12.7% Tier 1 capital ratio, says Vikram Pandit, chief executive officer of Citi.
This quarter also marks a key milestone in our plan, as we are now reporting our financial results to reflect the separation of Citi into two primary operating segments: Citicorp and Citi Holdings.
Citicorp is our core franchise and will be the source of Citis long term profitability and growth. Citicorp is unique with institutional and consumer businesses operating on an unmatched global footprint. We will manage our businesses and assets in Citi Holdings to optimize their value over time. We have already announced the sale of a number of businesses within Citi Holdings, and its assets have been reduced by approximately USD250 billion since the first quarter of 2008.
Our financial results today reflect the incredibly dedicated efforts of all of our people around the world and their success in implementing our plan. Our earnings of USD4.3 billion reflect the benefit of the closing of the Smith Barney joint venture with Morgan Stanley, which was a key element in our Citi Holdings strategy. This quarters results underscore the earnings power of Citicorp, with over USD3 billion of net income.
As we look forward, we will continue the same relentless focus on executing our plan. We remain optimistic that our turnaround of Citi will gain speed. Our institutional business has a strong client franchise. Our most significant challenge now remains consumer credit. Losses in our consumer businesses have been growing for some time, but we see some positive signs of moderation in those loss trends. Sustainable profitability remains our primary goal.
L.D.