Feb 12 Citigroup Inc plans to dip into
funds that it set aside against bad mortgages in its Citi
Holdings unit "sooner rather than later," Chief Financial
Officer John Gerspach said, in a move that should reduce the
unit's drag on profits.
Citi Holdings houses mortgages and other businesses that the
third-largest U.S. bank is winding down after they produced huge
losses during the financial crisis. The bank set aside money to
cover losses from the loans, and releasing those reserves would
help offset other losses in the unit. Citi Holdings lost $3.7
billion in 2012.
Gerspach, speaking at an investor conference on Tuesday,
indicated the reserve releases likely would not come in the
first quarter but would not have to wait until next year in the
current economic environment. Citi Holdings is not likely to
break even in 2013, he added.
In a report earlier on Tuesday, Bernstein Research analyst
John McDonald said Citigroup could start releasing some of its
$8.4 billion in U.S. mortgage reserves in the next two quarters.
An improvement in mortgage delinquencies and losses would drive
the move, McDonald wrote.
Another way Citi Holdings could move toward breaking even
would be "dealing with" ongoing claims from mortgage finance
providers Fannie Mae and Freddie Mac, Gerspach said.
The two government-owned enterprises have been
requesting that Citigroup and other banks buy back soured loans
they sold to the two mortgage finance companies during the
"I do think that it is an issue that not only the industry
but also Fannie and Freddie are interested in putting to an
end," he said.
Fannie Mae's recent settlement with another large bank is a
sign that "the industry could be able to get this element behind
us in 2013 or perhaps the early part of 2014," Gerspach said.
Fannie Mae said in January that it settled with Bank of America
In the fourth quarter, Citigroup added $179 million to its
repurchase reserves, which now total $1.6 billion.