Citigroup misses 2Q target

No. 1 financial firm says terrible capital markets environment caused unexpected profit drop.

July 18, 2005: 6:38 AM EDT

NEW YORK (CNN/Money) - Citigroup reported lower second-quarter earnings Monday that missed Wall Street forecasts, as the company said the capital markets environment was one of the worst it has seen in years.

The nation's No. 1 financial services company earned $4.7 billion, or 91 cents a share, from continuing operations, down from $5.1 billion, or $1.02 a share it earned excluding special items a year earlier. Analysts surveyed by earnings tracker First Call had forecast EPS to stay unchanged at $1.02.

Citigroup (Research) saw revenue excluding special items rise slightly to $20.2 billion from $19.7 billion on that basis a year earlier.

The company said that besides the difficulties in the capital market, its results were hurt by a narrowing gap between long-term and short-term interest rates, a condition known as a flattening yield curve.

It also said new bankruptcy legislation caused a short-term spike in bankruptcy filings as individuals rushed to file under the old law. That added about $175 million to its North American credit costs.

Net income in the quarter rose sharply to $5.1 billion from $1.1 billion in the year earlier period, when the company took an after-tax charge of nearly $5 billion for a WorldCom class action settlement as well as posted a gain on the sale of its stake in Samba Financial Group.