More troubles for the financial sector.
“Citigroup expects “substantial decline” in Q3 net income, sees a YoY decline of 60%
Co announced that dislocations in the mortgage-backed securities and credit markets, and deterioration in the consumer credit environment are expected to have an adverse impact on Q3 financial results. Citi currently estimates that it will report a decline in net income in the range of 60% from the prior-year quarter, subject to finalizing third quarter results. “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. “Our fixed income trading business has a long history of earnings power and success, as shown in this year’s record first half results. In September, this business performed at more normalized levels and we see this quarter’s overall poor trading performance as an aberration. While we cannot predict market conditions or other unforeseeable events that may affect our businesses, we expect to return to a normal earnings environment in the fourth quarter.” Co cites write-downs of approximately $1.4 bln pre-tax, net of underwriting fees, on funded and unfunded highly leveraged finance commitments… Losses of approximately $1.3 bln pre-tax, net of hedges, on the value of sub-prime mortgage-backed securities warehoused for future collateralized debt obligation (”CDO”) securitizations, CDO positions, and leveraged loans warehoused for future collateralized loan obligation (”CLO”) securitizations… Losses of approximately $600 mln pre-tax in fixed income credit trading due to significant market volatility and the disruption of historical pricing relationships.”
source: Briefing.com
