Citi Earnings Bloodbath: $3.8 Billion ($1.23/Share) In Reported "Earnings" Really $0.5 Billion Or $0.16/Share

Tyler Durden's picture

Another stunning EPS beat from Citi today which reported $20.8 billion in revenue and $1.23 in earnings on expectations of $19.23 billion in top line and $0.82 in EPS.... Until one actually reads the following two parts from the earnings release: "Third quarter revenues included $1.9 billion of credit valuation adjustment (CVA) reflecting the widening of Citi’s credit spreads during the third quarter. Excluding CVA, third quarter 2011 revenues were $18.9 billion, 8% below the prior year period and 8% below the second quarter 2011. CVA increased reported third quarter earnings by $0.39 per share"....and... "Loan Loss Reserve Release of $1.4 Billion in Third Quarter, Down from $2.0 Billion in Each of Second Quarter 2011 and Third Quarter 2010." Once again, the bank releases reserves (i.e. a perceived improvement in economic conditions), even as its takes a benefit for major economic deterioration (the equivalent of hypothetically buying bank its debt at lower prices due to risk flaring, or said otherwise, buying CDS on itself). Either way, this is non-recurring gibberish. You take the $3.77 billion in Net Income, take out $1.9 billion in "buying CDS on yourself", and the $1.4 billion in phantom EPS loss reserve, and end up with $0.5 billion or $0.16 per share. It will take the vacuum tubes about an hour to figure this out. Oh yes, and revenues were really $18.9 billion ex $1.888 billion in CVA. Adding insult to injury is that Citi will now have to pull a Morgan Stanley and defend itself against its European exposure: Citigroup (C) has $14.4 billion gross funded exposure in France and Belgium, and $18.0 billion unfunded commitment to Belgium/France.

The bank is kind enough to present the key P&L items:

Citi's loan loss reserve releases: the bank has taken $11 billion in benefits form loan loss reserves since Q3 2009.

As a reminder, Citi has $421 billion in its 3rd party mortgage servicing portfolio, against which it has about 5%, or just $27 billion in Rep and Warranty liability reserves:

And lest anyone forget, courtesy of Operation Twist, banks can kiss Net Interest Margin goodbye. The 2.83% NIM in Q3 is going down. Going down down.

Full presentation:


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ToNYC's picture

Surrealistic Pillow talk. Wunderland stuff smoking and mirroring spreads and fall-down CDS counterparty support.

trav7777's picture

C didn't make any money...who is shocked by this?

At least they didn't lose eleventy billion like past quarters.  There isn't going to be profit growth in the aggregate going forward...we're not in the Age of Growth any longer

Fukushima Sam's picture

I'm sure everything is just fine over at Citi...

ToNYC's picture


Potemkin had to build actual fake frontages of his imaginary villages; C needs only to chat amongst itself.

tarsubil's picture

Green shoots, red streams, same difference. 1.23 or 0.16, who cares? It is all worthless.

Don Birnam's picture

Of course it was a bloodbath. 

That is why apologist Reuters is running, "Citigroup Beats Street, Sets Aside Less to Cover Bad Loans." The Powers That Be simply cannot be seen with even a single protein molecule of egg on their faces.

VegasRage's picture

LMAO! Awesome hilarity. 

trampstamp's picture

We're going to need a bigger vault

cossack55's picture

A little optomistic on the tubes learning curve.

johngaltfla's picture

Yup. And there's your preview of the squid which should be VERY interesting.

Sudden Debt's picture

Time to max out your Citi visa card boys and girls!

and settly to pay back 1/5 of the amount for total redemption of the rest of the amount! :)

jcaz's picture

LOL-  as a former Citi Investment Services exec, I can say with certainty that they are even fluffing the 16 cents.......

GeneMarchbanks's picture

What do you mean by 'fluffing', what exactly goes on in Citit?

depression's picture

subtract out the $1.9 Billion CDS on itself, that is priceless...Time to throw a TARP over Citi

HoofHearted's picture

Tell your avatar to get to it. (Avatar is actual size of the real Timmay, by the way.)

HoofHearted's picture

Is it true that part of the bonus at Citi and the other TBTF are stock options...put options? Seems to be the better deal all things considered....

Nascent_Variable's picture

They're giving out CDS as bonuses, right after they buy it and generate all that revenue, of course.

MFL8240's picture

Run into the ground by none other than the White House friend and Wall Street insider Robert the con man Rubin.

Fips_OnTheSpot's picture

Tell me lies, tell me sweet little lies. (and german media eating the bait.. CHEERIO)

GeneMarchbanks's picture

Sets the stage nicely for the rest of financial 'earnings' reports...

ziggy59's picture

i should be learning how to work these banks' magic on my P&L statement especially if i want  a loan from one them.

jhcullen's picture

I am now more excited for the weekdays than the weekends... The unraveling is intense

slaughterer's picture

Citi earnings are, without fluff and accounting tricks, really losses, i.e. negative.  Pandit the Bandit will not let his ego get in the way of a truckload of fluff though.   

TooBearish's picture

How in the world this "earnings report" passes muster with even the most positive perma-bull is beyond any rational comprehension

junkyardjack's picture

The bulls are happy that C picked up some European debt, there's only one direction that stuff can go

slaughterer's picture

Cannot wait to see the Squid's CVA adjustment.  We should start a betting pool here.  I bet $1.22.

jdelano's picture

Hilarious.  On Bloomberg Tom immediately called horseshit on C's beat while Ken flailed desperately to spin it gold.  Interpretation?

Tom = at least smart enough to be out or short

Ken = still humping his 201K.  

junkyardjack's picture

The banks must be seeing something that we aren't since they can release more of their loan loss reserves.  Those OccupyWallStreet folks are going to feel a bit silly when the US storms back out of a recession in like 2 weeks and pulls out some China type growth.  There will be so many jobs people won't know what to do.  

Isn't it odd that banks could buy CDS on themselves? They already build into their employees the short termed thinking of you benefit from any upside and don't see any of the downside but now the entire firm will be operating on we'll pick up some extra revenue the closer we get to bankruptcy?  They hold the country hostage being too big to fail and then they try everything they can to actually fail.  Hopefully the Occupy Wall Street movement will help some saavy politicans realize that they could benefit from creating policies that help out the actual citizens of the US instead of the corporations that are trying to run the country into the ground.

depression's picture

New York Police Department said at least 88 protesters were arrested in New York on Saturday and overnight, including two dozen for trespassing at a Citibank branch and 45 in Times Square.

On Sunday, President Obama honoured Martin Luther King at a dedication to a new memorial on National Mall in Washington. Referring to protests that have spread from Wall Street to London, Rome and elsewhere, Mr Obama said: “Dr King would want us to challenge the excesses of Wall Street without demonising those who work there.”

trav7777's picture

another boondoggle on the Mall, and of course "mistakes were made" but nobody is actually culpable.  Everyone was just "doing their job" and "following orders," just like Wall Street.

Why isn't the MLK memorial 556' tall?  He is literally the most significant person who ever existed, as he invented dreaming.  We need more streets, buildings, memorials for MLK.  And at least 2 or 3 more holidays.

Mesquite's picture

There's probably a 'banking holiday' in the near future...

Conrad Murray's picture

Find an MLK boulevard near you and drive down it. It will be completely self-evident this smiley asshole is spot on.

rpboxster's picture

I don't recommend driving down any MLK street.

Boilermaker's picture

Citi up pre-market, of course.

Incredible.  Simple incredible.  <golf clap>

tim73's picture

Pre-markets are almost always up because the early morning coke deliveries.

Mesquite's picture

Heh heh heh...Luv it...

Desperate Manipulation...

Sorta brings to mind= Dinosaurs in the Tar Pits..!  

DeltaDawn's picture

The new golf clap is called "upward sprinkles".

Zgangsta's picture

But...don't the expectations take the CVA adjustments into account now?

MRSAP's picture

Same bullshit like JPM. Extra money made by CVA/CDS

Forgiven's picture

Tyler that's not a problem for Citi, that's their game plan.  All they have to do is wrap themselves even tighter to Europe.  They and the rest of the TBTF banks will all force a global collapse and whether we like a global federal government or not, it will be forced upon us by the banksters.

tim73's picture

This is so sad...even Our Dear Banks cannot make money by making money?!

snowball777's picture

Can't they just buy some encouraging signage for the Frogs like they do for the American girls and boys at Bailout Ballpark?


HITMAN56's picture

Citi acct got hacked while in Asia last month...didn't even have to close acct...they did it for me...sometimes its better to be lucky than right...