Second quarter net income at Citigroup Inc. slumped to US$2.7 billion from US$4.4 billion in the prior quarter, as revenues slumped in certain businesses and its hived off assets suffered a heftier loss, the U.S. banking giant said Friday.

The firm said that revenues declined by US$3.4 billion and net income was down US$1.7 billion from the first quarter, largely as a result of lower revenues in the securities and banking division, and in its special asset pools. Citi’s other core businesses showed consistent strength, it added.

Provisions for credit losses and for benefits and claims declined US$2.0 billion sequentially to US$6.7 billion, the lowest level since the third quarter of 2007, reflecting continued improvement in credit quality. But expenses were up 3% sequentially, reflecting the impact of the UK bonus tax.

In the second quarter, Citicorp earned US$3.8 billion while Citi Holdings, which holds the non-core business it is trying to divest, had a loss of US$1.2 billion (up from US$887 million in the previous quarter). Citi Holdings reduced its assets by US$38 billion in the second quarter and by a total of US$362 billion since the peak in the first quarter of 2008, a 44% reduction. Citi Holdings now represents less than 25% of Citigroup’s assets compared to 38% at its peak.

The firm now boasts US$122.9 billion in Tier 1 Capital and a Tier 1 Common ratio of 9.7%. In addition, it has common equity of US$154.5 billion and US$46.2 billion in loan loss reserves.

“I am pleased that we have produced solid operating results for the second consecutive quarter,” said Vikram Pandit, Citi’s CEO. “While the market environment lowered revenues in securities and banking, credit improved for the fourth consecutive quarter. We saw growth internationally, particularly in transaction services and regional consumer banking in Latin America and Asia. We continue to reduce the size of Citi Holdings, and it now makes up less than a quarter of Citigroup’s balance sheet,” he added.

“Although economic conditions remain challenging and global regulatory frameworks are uncertain, we believe these results demonstrate that the difficult decisions made by our management team have put in place all the elements for sustained profitability,” Pandit said.

IE