Citigroup officially opened for business Thursday with a signal to the investment community that its third-quarter earnings were down 53%.

In an unusual and detailed disclosure ahead of an announcement scheduled for later this month, Citigroup said it would probably report net income of $700 million, down from the year-earlier pro forma of $1.5 billion for Citicorp and Travelers Group.

The poor showing was traced to heavy losses in corporate banking and in trading at the Salomon Smith Barney unit.

Market watchers viewed the announcement as an attempt to clear away bad news and raise expectations for future quarters. But it also suggests that money-center bank earnings statements in coming days could be the bleakest in recent memory.

Meanwhile, among some Citigroup employees cultural matters came to the fore as the merger was consummated. (See page 3.)

Analyst Bradley Ball of Credit Suisse First Boston said that as more attention turns to cost cutting, job reductions could be double the 8,000, or 5% of the Citigroup work force, that have been expected.

Co-chief executive officers John S. Reed and Sanford I. Weill said "almost unprecedented instability" in fixed-income activities and in emerging markets had a "severe effect" on operations.

"The corporate businesses are likely to be operating in choppy conditions, but their core franchises remain strong," the two chairmen said. "We will continue to reduce risk and associated assets as appropriate, but to stay in positions that represent good value as we work to integrate the organizations."

Analysts said the estimated earnings amount to 30 cents a share, 15 cents lower than the consensus forecast. Excluding a separate restructuring charge by Citicorp last year, the third-quarter combined result would be down 67% from a year earlier.

The Salomon Smith Barney unit suffered the most, Citigroup said, posting a net loss of $325 million on $700 million in after-tax global arbitrage and Russian-related credit failures.

The Citicorp corporate bank recorded a $130 million net loss, reflecting $240 million of after-tax losses from Russian securities. Another $100 million was lost from the sale of mark-to-market fixed-income securities.

Revenues from corporate activities were "understandably" below normal, the company said. Gains from venture capital and the sale of Brady bonds, which have typically bolstered Citi's results, were wiped out this quarter.

The release of detailed results so close to earnings report season is an extraordinary gesture to counteract rumors that the quarterly report would have been worse, analysts said.

"They are getting all the bad news out now so they can use the real earnings day to talk about good news," said Mr. Ball.

"History has shown that bank stocks go into a free fall until the companies quantify their results," said Steven Biggar of S&P Equity Research. "They are trying to provide stability."

Citigroup shares fell sharply early on their first day of trading, to $28.50 from $30.625 at the opening. They ended at $32.125, up 37.5 cents.

Mr. Reed and Mr. Weill hinted that expenses would be an even greater focus for the next few months. Among other cuts, Salomon will probably shut down its global arbitrage unit, analysts said. Salomon shut down its U.S. arbitrage unit earlier this year.

Mr. Reed and Mr. Weill said they expect "substantially" better results in 1999 versus this year and last, assuming that financial markets stabilize. The rebound would be fueled by consumer services and insurance, they said.

"Because the near-term economic outlook remains uncertain and third- quarter results are disappointing, the path we must take is clear," the executives said. "We will expand our reach and increase our efforts to serve our customers better by taking every opportunity to cross-market products and services throughout our distribution networks."

They also pledged to build businesses that behave more predictably despite volatile market swings.

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