Thursday, July 15, 2004

Who Ultimately Pays for this Group of Legal Fees of $4.95 Billion for MCI & ENRON ?

MCI, Enron Imbroglio Gut Citigroup Profit

NEW YORK (Reuters) - Citigroup Inc. (NYSE:C - news) on Thursday said second-quarter profit fell 73 percent to nearly a six-year low, after setting aside $4.95 billion for legal costs related to MCI, Enron and other scandals.

Ken Lay

The world's No. 1 financial services company said net income fell to $1.14 billion, or 22 cents per share, from $4.3 billion, or 83 cents per share, a year earlier.

Excluding items, profit would have risen 24 percent to $5.34 billion, or $1.02 per share, New York-based Citigroup said. On that basis, analysts on average had forecast profit of 97 cents per share, according to Reuters Estimates.

"It was better than I was anticipating," said Jeffery Harte, an analyst at Sandler O'Neill & Partners LP in New York. "Retail and consumer (was) stronger than corporate and investment banking, but they seemed to offset each other."

Revenue rose 15 percent to $22.3 billion. Expenses rose 87 percent to $18.6 billion, but would have risen 7 percent excluding the legal charges, Citigroup said.

In May, Citigroup said it would pay $2.65 billion to settle claims by investors in WorldCom Inc., now known as MCI Inc. (Nasdaq:MCIP - news), that it hid risks.

It also increased reserves to pay for pending lawsuits involving energy trader Enron Corp. (Other OTC:ENRNQ - news), alleged biased stock research, initial public offerings and other matters.

Results also included a gain of $756 million, or 15 cents per share, for the sale of a 20 percent stake in Saudi Arabian bank Samba Financial Group.

Profit was the lowest since Citigroup reported $677 million in the fourth quarter of 1998, when the company had expenses for the merger of Citicorp and Travelers Property Casualty Corp. Citigroup has $1.4 trillion of assets.

"Underlying business dynamics were strong ... despite sluggish capital markets in May and June," said Chief Executive Charles Prince in a statement. "The credit environment is the best we have seen in years."


Consumer profit rose 37 percent to $3.07 billion, including half of the Samba gain, on revenue of $12.1 billion.

Retail banking income rose 15 percent to $1.16 billion, credit card income rose 34 percent to $1.01 billion and consumer finance income rose 14 percent to $594 million.

Citigroup's corporate and investment bank posted a $2.81 billion loss, including the legal charge and the rest of the Samba gain. Capital markets and banking income rose 28 percent to $1.5 billion, and transaction services income rose 45 percent to $261 million.

Global investment management profit rose 7 percent to $451 million, including increases of 15 percent in life insurance and annuities and 9 percent at the private bank, and a drop of 16 percent in asset management.

Private client services profit rose 15 percent to $209 million.

International profit surged 76 percent to $2.83 billion, including increases of 50 percent in Asia; 161 percent in Europe, the Middle East and Africa; 34 percent in Latin America, and 13 percent in Japan.

Citigroup shares closed Wednesday at $45.10 on the New York Stock Exchange (news - web sites). They have fallen 7 percent this year, while the Philadelphia KBW Bank Index (^BKX - news) has fallen 3 percent.

Answer: WE DO as Usual; however, knowing and accepting this fact during the pre-train wreck phase, could we have gonna ahead and spent $2.5 billion US Treasury dollars to restore & turnaround these huge companies instead of burning them to the ground?

Remember: Companies = People + Relationships + Assets
Economies = People + Companies


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