Citi: Negative Revenues

I'll leave the live-blogging of the Citi conference call (slides here) to David Gaffen and Floyd Norris. Norris has already made two excellent points: he's wondering why Citi's still paying a dividend at all, and he's noted that US revenues were actually negative in the fourth quarter, for some weird accounting reason.

As expected, there's a whole slew of equity injections to go along with the dividend cut. The biggest new investor is Singapore; the most intriguing is Sandy Weill. There's also going to be a public offer of $2 billion in new convertible securities, for everybody who's jealous of the deals that the sovereign wealth funds are getting.

I'd note that the $5 billion of losses that Citi is taking on the US consumer side took place within a context of 10% year-on-year loan growth. These aren't old loans going bad, they're new loans going bad. Citi's loan-loss reserve ratio for its US consumers has risen from 0.99% in the second quarter to 2.10% in the fourth. Yikes. But that's always going to be a problem when you're in the credit-card industry: it's very hard to reduce your customers' credit limits, which could well have been set some time ago and only now being used.

Also worth noting: the delinquency rate on Citi's second mortgages, at 1.38%, is significantly lower than the delinquency rate on its first mortgages, which is 2.56%. That's largely because the first-mortgage figure includes subprime, where there's a 7.83% delinquency rate. But I suspect that the second-mortgage rate is a long way from peaking: a bit like credit cards, people have to max out their home equity lines before they default on them.

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