Citigroup profit falls on brokerage unit writedown

Citigroup made more money from mortgage lending and trading stocks and bonds in the third quarter,but profit dropped after it wrote down the value of its retail brokerage business by $4.7 billion

Written by Reuters | New York | Published: October 16, 2012 12:58 am

Citigroup made more money from mortgage lending and trading stocks and bonds in the third quarter,but profit dropped after it wrote down the value of its retail brokerage business by $4.7 billion.

The results were better than analysts had expected,and the bank’s shares moved up 3.5 per cent. A measure of Citigroup’s lending profit rose,even as competitors’ lending margins fell.

But the writedown of its joint venture with Morgan Stanley,amounting to $2.9 billion after taxes,reflects the bank’s lingering difficulties from the financial crisis.

Chief executive Vikram Pandit is reshaping the bank to focus on commercial and investment banking,retail banking for relatively wealthy customers globally,and transaction processing. But the bank’s Citi Holdings unit,which houses businesses and assets the bank is looking to shed,continues to lose money — $3.56 billion in the latest quarter,compared with a loss of $1.22 billion a year earlier.

Including the brokerage unit writedown,announced last month,Citigroup posted third-quarter net income of $468 million,or 15 cents a share,compared with $3.77 billion,or $1.23 a share,a year earlier.

Adjusted earnings,excluding the writedown and accounting gains and losses,was $3.27 billion,or $1.06 a share,beating analysts’ average estimate by 10 cents,according to Thomson Reuters.

The bank’s net interest margin,a measure of profit on loans that excludes credit losses,rose to 2.86 per cent from 2.83 per cent in the same quarter last year. JPMorgan Chase & Co and Wells Fargo & Co both posted shrinking margins in their quarterly earnings reports last Friday.

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