Choppy waters

New York, April 18 (Reuters): Citigroup Inc has posted its second straight quarterly loss on Friday, hurt by more than $16 billion in write-downs and increased costs related to credit losses.

The company recorded a first-quarter loss of $5.11 billion, or $1.02 per share, compared with a year-earlier profit of $5.01 billion, or $1.01 per share. Revenues fell 48 per cent to $13.22 billion.

Analysts expected a loss of 96 cents per share on the revenue of $14.35 billion, according to Reuters estimates.

Though the loss was larger than expected, Citi shares rose $1.54, or 6.4 per cent, to $25.57 in pre-market trading.

The company attributed its weak performance mainly to its sub-prime related direct exposures in fixed income markets and highly leveraged finance commitments.

“This is the quarter they get to clear the decks,” said Arthur Hogan, chief market analyst at Jefferies & Co in Boston.

“Chief executive Vikram Pandit is coming in and making pretty big changes, and that's what he gets to do. It's a cathartic quarter.”

Another lender with heavy debt exposure, Merrill Lynch & Company, set more than $6.5 billion of write-downs on Thursday.

Pandit is trying to focus on stronger businesses and cost cutting after years of under-investment and questionable risk management made Citigroup bear the brunt of the credit market crisis.

Expenses rose 4 per cent to $16.22 billion, but fell 2 per cent from the fourth quarter.

In the last two weeks, Citigroup said it was selling its Diners Club International credit card network and most of its North American commercial lending and leasing business.

It has slashed its dividend and raised more than $30 billion in capital.

It ended the quarter with a Tier-1 capital ratio of 7.7 per cent, up from 7.12 per cent at year-end and well above the 6 per cent that regulators consider “well-capitalised”. The ratio measures the ability to cover losses.

Write-downs in the latest quarter included $6 billion tied to subprime mortgages, $3.1 billion for loans to fund corporate buyouts, $1.5 billion for exposure to bond insurers, $1.5 billion for auction-rate securities, $1 billion for below-prime Alt-A mortgages and $600 million for commercial real estate.

The bank also incurred $3.1 billion of additional credit costs related to consumer lending.

“Results reflect the continuation of the unprecedented market and credit environment and its impact on our historical risk positions,” Pandit said.