Citigroup Debuts On Down Note
Citigroup Inc., the financial behemoth created by the merger of Citicorp and Travelers Group, said Thursday that global economic turmoil would slice third-quarter profits in half. It termed those results "disappointing."
The company said it expects significant improvement in 1999.
For the third quarter, Citigroup (CCI) projected it will earn about $700 million, compared with a pro forma gain of $1.5 billion for the two predecessor companies a year earlier. The combined year-ago results include a $600 million restructuring charge.
The new stock, which opened for trading Thursday morning, fell 1 3/4, or 5.5 percent, to 30.Third-quarter results were undercut by poor performance by the Salomon Smith Barney and Citibank corporate banking units.
Salomon will report a loss of about $325 million, "reflecting after-tax losses of $700 million related to Global Arbitrage and Russia credit losses," the new company said.
And Citibank will report a loss of $130 million, largely due to $240 million in after-tax losses related to Russia as well as about $100 million related to "marking to market fixed-income inventories."
Both units had previously announced their Russian losses.
Looking ahead, Citigroup reported that it expects results to strengthen.
"[W]e expect 1999 core business results to be substantially above the pro forma actuals for both 1998 and 1997, driven by strong performance in the consumer and insurance franchises," according to a joint statement from John S. Reed and Sanford I. Weill, the company's co-chairmen. "The corporate businesses are likely to be operating in choppy conditions, but their core franchises remain strong."
The chairmen also reiterated their view that the post-combination company would be better able to withstand the gale winds of the current and future global economic storms.
"Today," the joint statement continued, "major financial companies need not only customer, product and geographic diversity but also unprecedented capital strength to deal with the economi upheavals that can occur."
The chairmen also said they would recommend to Citigroup directors, who will hold their first meeting Oct. 20, that they declare an initial quarterly dividend of 18 cents a share, to be paid in November.
Written By Jeffry Bartash