Citibank, the nation's biggest bank, says it lost $14 billion in the first quarter. But its assurance that it was working to climb out of the hole was good enough for investors, who bumped up its stock 4%. Bob Moon reports.
TESS VIGELAND: All week long, investors heard from a parade of banking executives declaring, "Hey, you know all those massive losses we're reporting? No worries, mate. The worst -- we think -- is behind us."
And investors bought it, quite literally, every time. Today, all the country's biggest bank had to say was that it's working to climb out of the hole. $14 billion in first-quarter losses? Good enough to bump Citi stock up more than 4 percent. Our Senior Business Correspondent Bob Moon will try to explain....
BOB MOON: Yeah, right. Trying to explain Wall Street's reaction this week is like...well, like trying to explain the rally that followed the first round of big losses the banks reported at the end of the last quarter. At Fifth Third Asset Management, portfolio manager Jon Fisher says the rationale then went something like this: Surely these banks have thrown in everything but the kitchen sink, to get this over with.
JON FISHER: Everyone thought that three months ago, and quickly thereafter Citi and others were desperately raising capital and were talking about credit and the markets getting worse. So everyone was wrong three months ago with that assessment. I don't know why it's any more believable today.
Fisher says investors seem to be ignoring what even Citigroup executives were warning today about their credit card business. History has shown that economic slumps, especially if there's high unemployment, inevitably bring a surge of people unable to pay their bills.
FISHER: Consumer credit has just now really started to deteriorate, so we're early on in that deterioration. So all of their credit businesses, their traditional basic bank businesses, you know, taking deposits and making loans. That credit stuff's going to get a lot worse.
Citigroup's finance chief Gary Crittenden conceded as much to analysts during a conference call today:
GARY CRITTENDEN: There's no assurance that the amount of marks that we've taken in this quarter are finished. I think we have substantially reduced our amount of risk, but there's always the prospect that you could have additional marks, and that throws the calculation of, you know, that number pretty much out the window.
Wall Street may not have been listening, but those worries weren't lost on Fitch Ratings. It downgraded Citigroup's credit rating today.