Citigroup could incur $21.2 billion of losses over nine quarters through mid-2015 and stay above minimum regulatory capital levels in a severe financial downturn.
The bank's Tier 1 common capital ratio would fall to as low as 9.1 percent under a severely adverse scenario, above the 5 percent minimum set by U.S. regulators, the New York-based company said today in a presentation on its website. Citigroup's projections come from a stress test mandated by the 2010 Dodd- Frank Act.
The biggest U.S. banks, including JPMorgan Chase & Co. and Bank of America Corp., must conduct so-called mid-cycle stress tests using their own scenarios and disclose a summary of the results.
Citigroup's figures assume $43.1 billion in pre-provision net revenue and an equal amount of loan losses in the nine quarters from the end of March 2013 through June 2015. Credit cards would account for $19.9 billion of the losses, according to the presentation. Trading and counterparty losses, not included in the loan-loss estimate, would total $10 billion.
Citigroup climbed 1.3 percent to $51.14 at 10:47 a.m. in New York, the third-best performance among 24 U.S. lenders in the KBW Bank Index, which gained 1 percent.
The adverse scenario assumes interest rates will drop and remain low, severe declines in home prices and a disruption to international trade for a "prolonged period," Citigroup said. Emerging-market economies most dependent on trade experienced average declines in gross domestic product of 9 percentage points, while those only moderately dependent on trade contracted 5 percentage points, the firm said.