Citi's earnings: Ugly, but in so many interesting ways
Citigroup's earnings release this morning is full of all sorts of interesting things beyond just that headline $9.83 billion fourth quarter loss. I imagine the most revealing stuff will be buried in the 10-Q that comes out later, and unearthed by people far more expert than I. Although as earnings releases go, this one is extremely detailed. Here are a few interesting numbers I stumbled across in a very cursory reading:
Citigroup net income, regional view, Q4 2007, in millions of dollars
U.S.: -9,030
Mexico: 482
Europe, Middle East and Africa: -3,139
Japan: 91
Asia (ex Japan): 1,425
Latin America: 464
Citigroup net income, product view, Q4 2007, in millions of dollars
(I'm leaving out a bunch of line items here)
U.S. Cards: 398
U.S. Retail Distribution: 245
U.S. Consumer Lending: -1,199
U.S. Commercial Business: 124
Securities and Banking: -11,632
That credit card income number is way down, from $852 million in the third quarter, thanks to "a $493 million pre-tax charge to increase loan loss reserves, reflecting a weakening of leading credit indicators in the portfolio and trends in the macro-economic environment." But hey, at least cards still turned a profit.
As for mortgages, here are Citi's origination volumes (in millions of dollars) this year:
Q1: 39,600
Q2: 46,200
Q3: 36,600
Q4: 29,500
And here are the loans 90+ days past due (also in millions of dollars):
Q1: 2,025
Q2: 2,527
Q3: 3,404
Q4: 4,348
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But hey, at least cards still turned a profit....And here are the loans 90+ days past due (also in millions of dollars):
I read somewhere recently (I wish I could remember where) that 70% of the people who were 3 months behind on their mortgages were current on their credit card debt. Credit cards remain profitable because of higher interest rates, penalties and increases in rates are applied almost immediately for 'late payments', and the horrible bankruptcy bill provides people with an incentive to default on their mortgages rather than their credit card debt because now outstanding mortgage debt after foreclosure is wiped out in bankruptcy procedings, but you can't get rid of the credit card debt.
This latter dynamic may also have played a signficant role in the housing/mortgage mess. People may have seen that they weren't going to make it, and converted all of their debt into 'second mortgages' knowing that if/when it all hit the fan and they had to declare bankruptcy, they wouldn't have their CC debt still staring them in the face. The second-mortgage companies were more than happy to loan money based on "housing bubble" value of homes long after it was obvious that the bubble was deflating....
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I think you are giving people with poor credit histories too much credit in financial acumen
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