Citigroup net slides 57 pct on writedowns, losses

By Jonathan Stempel

NEW YORK (Reuters) - Citigroup Inc (C.N) said on Monday that third-quarter profit fell 57 percent as losses mounted from subprime and leveraged loans, fixed-income trading and its U.S. consumer business.

The profit decline was the largest in three years for the No. 1 U.S. bank, and reflected $6.5 billion of pretax losses and write-downs, $600 million more than it estimated on October 1.

"This quarter's performance was well below our expectations, and frankly surprising," Chief Executive Charles Prince said on a conference call. He said some credit and trading losses "simply reflect poor performance."

Results renewed speculation about the job security of Prince, who in his fifth year has failed to consistently boost revenue faster than costs.

The New York-based bank also did not repeat prior comments suggesting a rosier outlook for the fourth quarter, rekindling fears that the global credit crunch won't be resolved soon.

News that Citigroup, Bank of America Corp (BAC.N) and JPMorgan Chase & Co (JPM.N) are planning a fund to avoid a fire sale of billions of dollars of bonds linked to subprime home loans and other debt nN15335944 also weighed on the market.

Shares of Citigroup, a Dow Jones industrial average .DJI component, closed down $1.63, or 3.4 percent, at $46.24. The Dow fell 0.8 percent.

Net income at Citigroup fell to $2.38 billion, or 47 cents per share, from $5.51 billion, or $1.10, a year earlier.

Revenue rose 6 percent to $22.66 billion while operating costs rose 22 percent to $14.56 billion.

Excluding acquisitions and a $729 million gain from selling shares in Brazil credit card processor Redecard SA (RDCD3.SA), revenue fell 3 percent to $20.84 billion. Return on equity fell to 7.4 percent from 18.9 percent.

Analysts on average expected profit of 43 cents per share on revenue of $20.81 billion, according to Reuters Estimates. Citigroup had on October 1 projected a 60 percent drop in profit.

"If corporate credit goes the way of consumer credit, Citigroup is going to have some big problems," said Jaime Peters, a banking analyst at Morningstar Inc. in Chicago.

Chief Financial Officer Gary Crittenden said U.S. consumer credit should weaken this quarter after mortgage delinquencies accelerated, and that for some fixed-income products, "we're not optimistic that they will regain a foothold."

He also said the bank likely won't buy back stock until early next year as it shores up capital levels.

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