Citigroup reports 57% profit decrease

by Gill Montia

Story link: Citigroup reports 57% profit decrease

Citigroup, the world’s largest financial services group, recorded a 57% decrease in profit, to $2.38 billion, in the third quarter of 2007. The result represents the biggest decline in net income in three years.

The group’s investment banking division recorded a 74% fall in third-quarter profit, to $446 million, as compared with the third quarter of 2006.

Profit from consumer banking operations declined by 44%, to $1.78 billion, and Citigroup’s alternative investments division, which includes the Smith Barney brokerage, recorded a loss $67 million, compared with a profit of $117 million in the third quarter of 2006.

Write downs in connection with the US property market amounted to $6.5 billion for the quarter, $600 million more than previously estimated.

The group has warned that results for the fourth quarter of 2007 are unlikely to show any improvement.

According to Gary Crittenden, Citigroup’s chief financial officer, September saw a sharp rise in late mortgage payments in the US and this trend is expected to worsen during the current quarter.

In addition, the values of some of the bank’s mortgage related bonds and other forms of credit may be permanently damaged.

Citigroup has suspended its share buyback programme until next year and will continue with cost reduction strategies that could involve further job losses.