Earnings Preview: Citigroup Inc.

CHARLOTTE, N.C. — Citigroup Inc. reports results for its third quarter on Thursday. The following is a summary of key developments and analyst opinion related to the period.

OVERVIEW: Citigroup has been among the banks hardest hit by the credit crisis and recession. It has received $45 billion in loans from the U.S. government — a portion of which was converted to a 34 percent ownership stake — and guarantees to protect against losses on more than $300 billion in risky assets.

The New York-based bank is also reportedly in talks with the U.S. government to reduce its stake in the bank.

Citigroup, like other national banks, has seen more customers stop making their monthly payments as the economy falters and unemployment rises. It’s a given Citigroup will see more debtors fail to make payments. The question is whether the rise in defaulting loans is starting to moderate, especially among credit cards and mortgages.

The bank has also been undergoing major management changes in recent months, adding new directors and replacing key executives. Former CFO Gary Crittenden left the bank in July, while the head of its Asia Pacific division, Ajay Banga, left in June.

After just five months as Citigroup’s CFO, Edward Kelly was put in charge of strategy and mergers in a new role as vice chairman in July. John Gerspach, the bank’s chief accounting officer, took over as CFO.

BY THE NUMBERS: Analysts surveyed by Thomson Reuters predict, on average, a loss of 38 cents per share on revenue of $20.04 billion for the quarter. Last year, the company lost $2.8 billion, or 60 cents per share, and its revenue fell 23 percent to $16.68 billion.

ANALYST TAKE: Fox-Pitt Kelton analyst David Trone says still high credit costs mean another unprofitable quarter at Citigroup. He is forecasting a net loss of about $2.4 billion, same as last quarter as revenue, expenses and credit costs are likely to be flat.

Trone said he expects net charge-offs, the amount of debt it does not expect to be repaid, to increase 7 percent to $8.9 billion, but expects Citigroup to reserve less for future loan losses.

Trone predicts Citigroup will lose 20 cents per share in the third quarter.

With credit quality deterioration continuing, Credit Suisse analyst Moshe Orenbuch is forecasting a 37 cents per share loss for the third quarter.

He is also forecasting weaker earnings out of the investment bank. He expects investment banking fees to total $850 million, or 27 percent lower than the second quarter, as there was less underwriting and merger and acquisition activity.

WHAT’S AHEAD: Citigroup continues to sell off some assets as it tries to focus on their core business, Citicorp, and remains focused on creating long-term profitability and growth.

Orenbuch says investment banking will remain in focus, as profits are likely to slow through the remainder of the year. He cut his full-year earnings estimate to a loss of 30 cents per share instead of breaking even.

STOCK PERFORMANCE: During the quarter shares climbed nearly 63 percent to end the period at $4.84. They rose 17 cents, or 3.5 percent, to $5 in trading Wednesday. Both the Dow Jones industrial average and the broader Standard & Poor’s 500 indexes gained 15 percent during the third quarter.