Economy in Crisis: Largest U.S. Bank Reports $5 Billion in Losses

How is this not bad for the economy:

Citigroup Inc (C.N: Quote, Profile, Research) posted its second straight quarterly loss on Friday, hurt by more than $16 billion of write-downs and costs related to credit losses, and said it will cut another 9,000 jobs.

Though the $5.11 billion first-quarter loss was larger than expected, analysts and investors expressed optimism that the largest U.S. bank and its new chief executive, Vikram Pandit, were taking necessary steps to move past credit problems and drive down costs.

Citigroup shares rose $2.22, or 9.2 percent, to $26.25 in premarket electronic trading.

"It's a cathartic quarter," said Arthur Hogan, chief market analyst at Jefferies & Co in Boston. "Vikram Pandit is coming in and making pretty big changes."

Citigroup's net loss totaled $1.02 per share, and compared with a year-earlier profit of $5.01 billion, or $1.01 per share. Revenue fell 48 percent to $13.22 billion.

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

"We're not happy with our financial results this quarter," Pandit said on a conference call. Nevertheless, he said his confidence in Citigroup's future is "extremely high."

The job cuts are in addition to 4,200 announced in the previous quarter. Citigroup said it ended March with about 369,000 employees.

[...]Citigroup has lost close to $15 billion in the last two quarters, and has suffered more than $46 billion in write-downs and increased credit costs since the middle of 2007.

The bank has also slashed its dividend and raised more than $30 billion in capital. It ended March with a Tier-1 capital ratio of 7.7 percent, up from 7.12 percent at year-end, and above the 6 percent that regulators deem "well-capitalized." The ratio measures the ability to cover losses.

Book value per share, which measures assets minus liabilities, fell to $20.73 from $22.74 at year end. Return on equity was negative 18.6 percent in the quarter.

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 bond insurer exposure, $1.5 billion for auction-rate securities, $1 billion for below-prime "Alt-A" mortgages, and $600 million for commercial real estate.