NEW YORK, United States

CITIGROUP Inc became the latest bank to take a cautious view of consumers’ credit problems, reporting a US$7.77 fourth-quarter loss due to failed loans and the costs of repaying government bailout money.

The bank said yesterday it did see some early signs of improvement in its credit business although it still needed to set aside US$8.18 billion to cover unpaid loans. That amount was down 10 per cent from the third quarter, and 36 per cent from a year earlier.

John Gerspach, Citigroup’s chief financial officer, reported one of those improving signs during a conference call with the media, noting that the number of mortgage and credit card loans that were newly delinquent, or between one and three months past due, had started to stabilise and even drop in some of its lending portfolios.

However, “the US credit story is still very much developing”, Gerspach said.

Gerspach’s comments were similar to those made by JPMorgan Chase & Co when it reported Friday that it earned US$3.28 billion during the fourth quarter thanks to its strong investment banking unit. JPMorgan said it set aside US$7.28 billion for failed loans during the fourth quarter, nearly identical to the amount it reserved for bad loans during the final quarter in 2008.

2009 was a year of drastic change at Citigroup, the big bank hit hardest by the credit crisis and recession. It may turn out to have the poorest fourth-quarter showing among the big banks, as it lacks the big investment bank and trading operations that have helped other companies like JPMorgan Chase offset their losses from bad loans.

The bank, which received US$45 billion in government bailout money, repaid US$20 billion during the fourth quarter and raised an equal amount of capital to fund the repayment. It shed 100,000 jobs during the year and completed 14 asset sales, including the Smith Barney brokerage and Japanese units Nikko Cordial Securities and Nikko Asset Management.

The bank’s loss after accounting for payment of preferred dividends came to almost US$7.77 billion, or 33 cents per share. That compared with a loss of US$18.16 billion, or US$3.40 a share, a year earlier. In the third quarter of 2009, it earned US$101 million.

The latest results were in line with analysts’ expectations, according to Thomson Reuters. Citigroup lost six cents per share excluding the charges tied to repaying government bailout money.

Citigroup said it recorded an after-tax loss of US$6.2 billion for expenses related to the bailout repayment. The government has converted the remaining US$25 billion of the bailout money it gave Citigroup into a 34 per cent stake in the bank. The government is planning to sell its stake in the bank during the next year.

The bank’s stock rose two cents to US$3.44 in morning trading. The stock price is perhaps the clearest indication of how far Citigroup fell during the banking crisis and recession; at the stock market’s peak in October 2007, it traded at US$45 a share.

Investors have remained skittish about the health of Citigroup, most notably last month when Citigroup sold new shares to repay the government. Shares were sold at US$3.15 during the sale, well below what the bank and government were expecting. That forced the government to hold off on selling the first US$5 billion of its stake in the bank until the price rebounded.

Citigroup spent much of 2009 trying to reorganise and streamline its operations to return to consistent profitability. It split its operations into two units, Citicorp and Citigroup Holdings.

Citicorp, which holds the bank’s primary businesses such as regional consumer banking, generated net income of US$1.7 billion during the quarter. Citigroup Holdings, which is where the bank placed noncore assets that it has been looking to sell or unwind, lost US$2.5 billion during the October-December period.

Total assets in Citigroup Holdings fell by US$70 billion to US$547 billion during the fourth quarter.

For the full year, Citigroup lost US$1.61 billion, or 80 cents per share. It lost US$27.68 billion, or US$5.61 per share in 2008.