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Citi suffers loss on writedowns, credit costs

Jeremy Simon

Earlier today, Citigroup reported a fourth-quarter net loss of $9.83 billion on subprime-related writedowns and a spike in U.S. consumer credit costs.

Labeling the results “clearly unacceptable,” CEO Vikram Pandit said Citi’s “poor performance was driven primarily by two factors — significant write-downs and losses on our sub-prime direct exposures in fixed income markets, and a large increase in credit costs in our U.S. consumer loan portfolio.”

Citi said that its U.S. consumer credit costs rose $4.1 billion, “comprised of $689 million in higher net credit losses and a net charge of $3.31 billion to increase loan loss reserves.” The banking giant said that the “increase in credit costs primarily reflected a weakening of leading credit indicators,” with greater delinquencies suffered on consumer borrowing, including credit cards.

The announcement from Citi follows earnings warnings from both Capital One and American Express, with both of those issuers also citing credit card delinquencies.

Taken alongside today’s data showing retail sales slowed more than expected in December, the increase in credit card delinquencies could suggest U.S. consumers were not racking up charges on holiday gifts, but rather using credit cards to pay for necessities. Retail sales for all of 2007 rose at the slowest pace since 2002.

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