Citigroup Inc., the biggest U.S. bank, said mortgage delinquencies and consumer lending will deteriorate for the rest of the year after earnings fell 57 percent in the third quarter.
Citigroup had its biggest drop in two months in New York trading after Chief Financial Officer Gary Crittenden said on a conference call that borrower defaults are ``accelerating.''
Chief Executive Officer Charles Prince, who has overseen a 17 percent drop in the company's stock this year, said momentum ``continues very strong'' in most of the company's businesses. Since Prince became CEO in 2003, Citigroup shares are virtually unchanged, compared with a 29 percent jump at Bank of America Corp., the second-largest U.S. bank by assets.
``They certainly had a lot of troubles and to some extent have been tripping over themselves the last couple of years,'' Jeffery Harte, an analyst at Sandler O'Neill & Partners LP in Chicago, said in an interview. Prince is ``doing the right things strategically. It's become more of an execution problem lately.''
A key to this announcement is the phrase for the rest of the year. That's a tacit admission that the fourth quarter is not going to be good. I'm not sure what other financial companies have reported for their future projections so far, but most big financial companies have reported very large losses for the 3Q, so this news shouldn't be surprising.
Another key to this release is that "borrower defaults are accelerating." Again, this shouldn't be surprising to anyone, but it's another tacit admission that the credit crunch is far from over.
However, I find it odd that this news is sending the market lower today when other companies have reported a ton of losses. The last I counted, big financial companies had reported over $20 billion in 3Q losses.