Citigroup Expects a 60 Decline in Earnings After Mortgage Writedowns
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While the story of Citigroup taking a 3 billion dollar writedown on it’s mortgage business and a 60 percent decline in earnings, you have to figure that they are getting off pretty easy compared to what many have expected.
Citigroup made inordinate profits off of the subprime and Alt-A mortgage securitization and now are having to take their losses when the market backs off. This should not be a surprise to any except the headline writers for major newspapers and websites. I expect the losses to increase over the coming quarters as the companies unwind their extended positions.
Citigroup will write down about $1.4 billion on funded and unfunded loan commitments when it announces its third-quarter results. It will record losses of about $1.3 billion on the value of securities backed by subprime loans. Citigroup will also record a loss of $600 million in fixed-income credit trading due to market volatility.
Third quarter global consumer credit costs also increased $2.6 billion from the same quarter a year ago, the company said. About 75 percent of that increase is due to rising loan-loss reserves — money held to cover loans that default. via Yahoo! Finance.
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