Citi beats hopes with £1.25bn loss

Citi beats hopes with £1.25bn loss

The world's biggest bank has given the under-pressure UK financial sector a lift after posting better-than-expected results.

Citigroup suffered a net loss of 2.5 billion US dollars (£1.25 billion), comfortably ahead of the three billion dollar deficit expected by analysts. It was also less than half the 5.1 billion dollar net loss seen in the first quarter.

The performance prompted a rally for shares in London amid hopes the credit write-down corner may have been turned. Banks were doing particularly well with Royal Bank of Scotland and Barclays both enjoying 8% surges.

Citi said its securities and banking division suffered a 7.2 billion dollars (£3.6 billion) write-down during the quarter, while an asset revaluation cost its consumer lending business 745 million US dollars (£372 million).

But the combined hit was significantly lower than the 13.6 billion US dollar blow suffered in the first quarter. However, credit costs jumped to 7.2 billion dollars (£3.6 billion) from six billion dollars (£3 billion) as more consumers defaulted on their loans - implying that while losses in the credit markets are decelerating, losses from actual defaults in Citi's mortgages, home-equity loans, auto loans and credit card lines are mounting.

The group said it had accelerated its job cutting programme in the second quarter, removing a further 6,000 jobs following the 5,000 culled in the first three months.

Citi originally announced in April it would be making 9,000 job cuts from its 370,000 global workforce, of whom 11,000 are in London. No breakdown of the current redundancies was available.

The bank's chief executive Vikram Pandit said: "We cut our second quarter losses in half compared to the first quarter. The cost of credit increased by 20% from the first quarter, but write-downs in our Securities and Banking business dropped by 42%. While there is still much to do, we are encouraged by our progress in delivering on our commitment to the re-engineering efforts."

Citi has failed to turn a profit for three straight quarters now, and its shares have tumbled 65% over the past year. The firm's second quarter revenues were 18.7 billion US dollars (£9.3 billion), up from the 13.2 billion (£6.6 billion) during the first three months.

On Thursday, Wall Street rival Merrill Lynch announced a second quarter loss of 4.9 billion dollars (£2.5 billion), which was worse than expected. The loss was largely caused by another 9.7 billion dollars (£4.8 billion) in write-downs on its mortgage-related investments.