Citigroup Reports Loss of $2.8 billion, Card Losses Soar

Consumer and investment banking giant Citigroup (NYSE: C) announced Thursday a loss of $2.8 billion for the third quarter of 2008. Revenue plummeted in the company’s credit card unit as credit losses soared.

For Citigroup, it was fourth straight quarter of reported losses.

In the third quarter, Citi reported a net loss of $2.81 billion, or 60 cents a share, compared with prior-year net income of $2.21 billion, or 44 cents a share. Company-wide revenue fell 23 percent to $16.7 billion.

Citigroup’s Global Cards unit swung to a loss of $906 million in the quarter, compared to net income of $1.44 billion in Q3 2007 and $452 million last quarter. Revenues in the Global Card unit declined 40 percent from the year-ago period to $3.79 billion in the third quarter.

Citi noted that the decline in revenue was based on two main factors. First, the unit recorded a $729 million gain in Q3 2007 on the sale of its shares in Brazilian card issuer Redecard that was not duplicated in this year’s quarter. Secondly, Citi blamed the dried up asset-backed securitization market in the U.S. for part of the decline.

The bank said that credit losses in its card unit, particularly in North America, soared in the third quarter. Net managed credit losses in the U.S. card unit were $2.7 billion in the quarter, compared to $1.65 billion in Q3 2007. The credit loss ratio of total managed credit card loans jumped from 4.51 percent to 7.13 percent in the third quarter of 2008.

Further, Citi said that 90-day+ delinquencies in its card unit are on the rise. In the third quarter, the Managed Loans 90+ Days Past Due rate was 2.11 percent in North America, up from 1.6 percent in Q3 2007.

Citigroup said in a statement, “Higher credit costs [in the credit card unit] reflected a weakening of leading credit indicators and trends in the macro-economic environment, including rising unemployment, higher bankruptcy filings, and the housing market downturn. Higher credit costs also reflected a significant increase in the rate at which customers became delinquent, as well as the continued acceleration in the rate at which delinquent customers advanced to write-off.”