Citigroup Report More Extensive Losses

by Stewart Douglas

Story link: Citigroup Report More Extensive Losses

Investment banking giant Citigroup has today announced the extent of its heavy losses over the third quarter, quantifying a 57% downturn in profits over the period as a result of significant exposure to credit markets in light of the credit crunch.

Revenues net of direct costs were down over the quarter to $2.4 billion, having shown beyond the $5.5 billion mark just one year prior. The bank has attributed much of the losses to over exposure in the US sub-prime sector and the subsequent market upset that affected the value of their investment division.

The news has added momentum to critics claims that executive Chuck Prince should stand down from his position as a result of alleged mismanagement in the run up to the significant sub-prime losses, along with several of his colleagues that have already left or been forced from their posts.

Similarly Japanese firm Nomura has today announced that it is reeling in its US lending relient investments in the US markets as a result of losses from the sub-prime fallout, and the greater potential for short term risk. It reported that the closure of the operation will cost $620 million, which has reflected an almost certain loss for the third quarter, and the year overall.

The announcements follow similar sentiments from Merrill Lynch, Bank of America and Deutsche Bank and main other top rate institutions, reflecting the true extent of the impact of the sub-prime catastrophe, particularly amongst investment institutions with interests in financial sector organizations and credit markets.

Citigroup had predicted that it would see a 60% drop in earnings at the beginning of this month, reflecting almost exactly the actual position arising from the sub-prime effect. It remains to be seen whether Chuck Prince will survive this latest market disappointment.