Citi Loses More Money

Net credit losses for Citigroup's consumer loans came down slightly in the third quarter to 5.73% of average loans from 5.88% in the second quarter. The improvement was primarily seen in the international markets, where losses in consumer banking improved by 13 basis points to 2.17% and delinquencies improved across the globe. North American trends were not quite as rosy. While losses in mortgages were basically flat with the second quarter (which by itself is an improvement from the constant increases seen since 2007), credit card losses continued to grow. On the basis of this early-stage suggestion that credit losses might be nearing a peak, Citigroup felt comfortable building its allowance for loan losses by $800 million compared with $4 billion in the second quarter.

The investment bank's results were a decided pullback from the second quarter. Trading spreads have tightened, reducing the level of trading gains the company recognized. Additionally, the tightening of Citigroup's credit spreads forced a $1.7 billion reduction in revenue. We suspect trading results will continue to decline as spreads tighten while the market gains more confidence.