Citigroup's Profit Mirage: 'Lower Than Expected Earnings' Doesn't Tell The True Story - It's Actually MUCH Worse - And They Set Aside $24.4 Billion For Pay & Bonuses
Citi claims net income this morning of $1.3 billion, but there were two large, offsetting charges that shaped this number.
1) - Citi’s earnings were also hit by a $1.1 billion charge related to the bank’s own debt. Citi debt rose in value during the fourth quarter as investors became more confident the company will be able to repay what it owes. However, accounting rules mean this positive development results in a charge against profit.
2) - Citi released $2.25 billion of loan loss reserves this quarter...which means that $2.25 billion was magically added to gross income.
So back out both charges, and Citigroup earned barely $150 million for the quarter, while J.P. Morgan earned $4 billion during the same 3 months. Ouch.
Also, the most important number is below - Citigroup set aside $24.4 billion for compensation and bonuses.
An insolvent bank paying $24.4 billion in bonuses...
Just another day in the U.S. Banana Republic...
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A Look Inside Citi's Numbers...
"I am very pleased that with our fourth consecutive profitable quarter, we earned $10.6 billion for the year,” Pandit said in a statement.
It’s always another excuse or shifting expectations at Citigroup. Handed a dismal quarter, Pandit’s focusing on a profitable year. The suggestion is that eking out a profit is the new standard for a too-big-to-fail bank that leans on the government and taxpayers.
- A more jaundiced look at Citigroup reveals that the bulk of its “profit” for 2010 was built on the release of loan-loss reserves, cash it was forced to set aside to gird against defaults. In the latest quarter, Citi released $2.25 billion. You can do the math: Without that amount released, Citi would have posted a loss of close to $1 billion.
Source - David Weidner - Marketwatch
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$24.4 Billion for pay and bonuses...
Compensation, the bank’s biggest expense, was $24.4 billion for the full year, down 2 percent from a year earlier, the company said in an earnings supplement. Citigroup had 260,000 employees at the end of 2010, up from 258,000 at the end of September, the first quarterly increase in three years.
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On the Call: Citigroup CEO Vikram Pandit
http://www.bloomberg.com/news/2011-01-18/on-the-call-citigroup-ceo-vikram-pandit.html
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Citigroup dividend? Not before 2012, CEO Vikram Pandit says
http://latimesblogs.latimes.com/money_co/2011/01/citigroup-dividend-payout-earnings-pandit-2012.html
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Citigroup Embroiled in `Mortgage Mess,': Tom Keene
“You just have this massive overhang of inventory on the banks’ and financial companies’ balance sheets,” Ritter said in a Bloomberg Radio interview on “Bloomberg Surveillance” with Tom Keene, referring to housing inventory. It’s “just going to continue to spill out into the market,” Ritter said.
http://www.bloomberg.com/news/2011-01-18/citigroup-embroiled-in-mortgage-mess-ritter-says-tom-keene.html
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Jan 24, 2011 at 6:10 PM
Reader Comments (14)
http://www.bloomberg.com/news/2011-01-18/on-the-call-citigroup-ceo-vikram-pandit.html
http://www.bloomberg.com/news/2011-01-18/citigroup-net-misses-estimates-on-charges-tied-to-tighter-credit-spreads.html
http://latimesblogs.latimes.com/money_co/2011/01/citigroup-dividend-payout-earnings-pandit-2012.html
“You just have this massive overhang of inventory on the banks’ and financial companies’ balance sheets,” Ritter said in a Bloomberg Radio interview on “Bloomberg Surveillance” with Tom Keene, referring to housing inventory. It’s “just going to continue to spill out into the market,” Ritter said.
http://www.bloomberg.com/news/2011-01-18/citigroup-embroiled-in-mortgage-mess-ritter-says-tom-keene.html
http://www.bloomberg.com/news/2011-01-18/confidence-among-u-s-homebuilders-stagnates-on-lack-of-credit-for-buyers.html
http://www.bloomberg.com/news/2011-01-18/connecticut-s-lieberman-gets-senate-challenge-from-democrat.html
http://www.bloomberg.com/news/2011-01-18/rich-americans-raise-consumer-spending-with-little-help-from-middle-class.html
Banks operating with bullseyes on their chests are picking who to reward more carefully
By Stephen Foley in New York
http://www.independent.co.uk/news/business/news/winners-will-get-lions-share-of-wall-streets-32bn-in-bonuses-2185608.html
Jan. 16--Politicians seem unwilling to act. The public is becoming exasperated. The villains of the piece are refusing to put on the brakes. So who can stop the bankers as they prepare to award themselves billions of pounds in bonuses, barely two years after being bailed out by the taxpayer?
http://www.americanchronicle.com/articles/yb/154640259
• Citigroup sets aside $24.4bn to pay salaries and bonuses
http://www.guardian.co.uk/business/2011/jan/18/citigroup-returns-profit-wall-street-bank
http://www.reuters.com/article/idUSTRE70H0O220110119
[snip]
BANGALORE (Reuters) - Citigroup Inc plans to name John Havens as president and chief operating officer as part of a structural overhaul to address the bank's efforts to expand, the Wall Street Journal said.
This story is of interest and may be related.
Black money in foreign banks plunder of nation: SC
http://www.hindustantimes.com/Black-money-in-foreign-banks-plunder-of-nation-SC/H1-Article1-652177.aspx
[snip]
The court was unhappy that the government filed an affidavit restricting information relating to the money deposited by 26 persons in Liechtenstein Bank in Germany.
Govt wakes up on black money issue after Supreme Court rap
http://www.hindustantimes.com/Govt-wakes-up-on-black-money-issue-after-Supreme-Court-rap/H1-Article1-652576.aspx
[snip]
The prime minister made it clear Wednesday that information on black money stashed in tax havens abroad cannot be made public as it would entail violation of India's treaty obligations with other countries and jurisdictions.
"The information will not be made public. It will be a violation of treaties," Manmohan Singh told reporters after initiating a cabinet reshuffle when asked about his stand on black money abroad.
[snip]
Jethamalani wanted the directions to be given to the government to bring back such ill-gotten money, estimated at a whopping $1.5 trillion - nearly one-and-a-half times India's gross domestic product - put away in foreign banks by Indians.
http://www.bloomberg.com/news/2011-01-24/paulson-made-more-than-1-billion-on-citigroup-stake.html
[snip]
Paulson & Co., the hedge fund run by billionaire John Paulson, told clients that the firm made more than $1 billion on its Citigroup Inc. investment since the middle of 2009.
Citigroup was the fund’s most profitable bank holding last year, Paulson said in a letter to clients this month.
“Citigroup demonstrates the upside potential of many of the restructuring investments we have added to our portfolio and our ability to generate above-average returns in large positions,” Paulson said in the letter, a copy of which was obtained by Bloomberg News.
Note: I have been keeping an eye on Rusal and Norilsk with regard to paulson et. al. . here is the latest:
http://www.themoscowtimes.com/business/article/norilsk-ready-to-up-bid-of-12bln/429355.html