NEW YORK — Citigroup Inc. became the latest bank to take a cautious view of consumers' credit problems, reporting a $7.6 billion fourth-quarter loss due to failed loans and the costs of repaying $20 billion in government bailout money.
Even with the loss, Citigroup, the hardest hit of the big U.S. banks during the credit crisis and recession, plans to give big bonuses this month to its top employees.
The earnings report Tuesday, which met analysts' expectations, reflected Citigroup's struggles and changing status in the banking industry. The company was forced to set aside $8.18 billion to cover the loans consumers can't repay, joining other big lenders that are still losing money on loans. But Citigroup, having been forced to shed its big investment banking and brokerage businesses during the banking crisis, lacked those buffers against losses that other major financial companies still have.
The company's focus, therefore, is on loans, which are deeply troubled but showing some very early signs of improvement. For example, the addition to Citigroup's loan reserves was down 10 percent from the third quarter, and 36 percent from a year earlier.
And John Gerspach, Citigroup's chief financial officer, said the number of mortgage and credit card loans that were newly delinquent, or one to three months past due, had started to stabilize and even drop in some of its lending portfolios.
However, "the U.S. credit story is still very much developing," Gerspach said.
Gregg Smith, a senior managing director at restructuring firm Conway MacKenzie, said Citigroup's results show the lending business is stabilizing. But he also noted it will be a long time before banks like Citigroup are strong enough to lend at historical norms. Many economists and investors are concerned that this trend could slow the economic recovery.
"They're just crawling out of the ditch now," Smith said of banks.
2009 was a year of drastic change at Citigroup, and it may turn out to have the poorest fourth-quarter showing among the big banks because it lacks the big investment bank and trading operations that have helped other companies like JPMorgan Chase offset their losses from bad loans.
The bank's loss after accounting for payment of preferred dividends came to about $7.6 billion, or 33 cents per share. That compared with a loss of $18.16 billion, or $3.40 a share, a year earlier.
Alois Pirker, a research director at consultancy Aite Group, said the bank has done well in recent quarters to control costs. Now its profitability will turn on how its loan portfolios perform this year, he said.
By repaying the bailout money, Pirker said, Citigroup is betting the economy will recover this year because it is removing a safety net of government support.
But paying the government back also frees Citigroup of restrictions on how much it can pay its employees. Like other banks that received bailout money, Citigroup had to win approval for its 2009 compensation from federal pay czar Kenneth Feinberg.
Citigroup did not disclose the size of the bonus pool or how big cash bonuses would be for 2010. The company will no longer be under compensation restrictions this year because it repaid the bailout money.
The bank, which received $45 billion in government bailout money, repaid $20 billion during the fourth quarter and raised an equal amount of capital to fund the repayment.