As Citigroup Inc. unveiled its third government bailout in five months Friday, the embattled New York company offered little hope that it will return to profitability this quarter.
In fact, Citi, which has not reported a profit since the third quarter of 2007, said significant goodwill impairments in several consumer units and a Japanese asset management arm forced it to raise its fourth-quarter and full-year losses.
Gary Crittenden, Citi's chief financial officer, said in an interview that given the current business environment, the company is poised to review goodwill for all its business lines quarterly — an accounting process that most companies have undertaken on an annual basis.
"We typically do it once a year," Mr. Crittenden said. "But we're doing it more frequently."
He spoke after Citi announced a deal that would give the federal government a 36% stake in the $2.02 trillion-asset company by converting preferred shares into common stock.
Citi also said Friday that it added a goodwill impairment charge of $9.6 billion to its fourth-quarter results to write down the value of consumer operations in the United States, Latin America, and Europe, the Middle East, and Africa, as well as Nikko Asset Management in Japan. The writedown raised its full-year loss by 48%, to $27.7 billion, or $6.42 a share.
Mr. Crittenden said Citi conducted the impairment test for the fourth quarter after "it became clear the economy had deteriorated significantly." He also raised the possibility of more testing and impairments in other businesses this quarter. "If the environment changes, we have a responsibility to do that."
According to some analysts, Citi's decision to take what has traditionally been an annual exercise and apply the testing quarterly demonstrates the degree of volatility in the banking industry.
"I think if the volatility continues as much as it has, you might see banks being proactive and addressing the issues as they occur, rather than waiting," said Frank Barkocy, the director of research at Mendon Capital Advisors Corp. There is "a major push on the part of investors for as much clarity and transparency as possible."
However, Robert Albertson, the chief strategist at Sandler O'Neill & Partners LP, said Citi's decision to write down goodwill impairment for its consumer businesses may be misguided and sends a message to investors that those businesses are less valuable than they are. He called the decision and the timing "one more in a series of optical mistakes" by Citi's management team.
Citi's consumer banks have come under pressure. Of the units that took goodwill charges, the Latin American unit remained profitable last year, earning $300 million, despite a fourth-quarter loss. Citi's unit for Europe, the Middle East, and Africa lost $475 million, while the North American unit bled $4.53 billion; neither unit had a profitable quarter last year.
The company suffered a deposit drain in many of those markets last quarter, contributing to an overall 0.8% decline from the third quarter, to $774.2 billion. Deposits in Europe, the Middle East, and Africa fell 22%, to $25.3 billion. In Latin America, deposits slid 14%, to $35.1 billion. In North America, however, deposit balances ticked up 4%, to $126 billion.
Mr. Crittenden said during a conference call Friday that overall deposits, excluding foreign exchange activities, have dropped another 2% since Dec. 31, though the decline "is consistent with seasonal patterns."
During the call both Mr. Crittenden and Vikram Pandit, Citi's chief executive talked about their desire to return to profitability, but neither one laid out a concrete road map for getting there. Mr. Crittenden said Citi is "managing and optimizing" Citi Holdings, the unit that houses its distressed assets. He also said the January results were "strong," but in the interview he would not say whether that meant profitable. "We would be absolutely delighted to do that in the first quarter, but it is still tough to call, given the volatility out there," Mr. Crittenden said in the interview.
During the conference call, Mr. Pandit said: "In the end, our business is about confidence." Investors seemed anything but confident Friday, sending Citi's shares down 39%, or 96 cents a share, to $1.50.