Citigroup drops highly leveraged loan commitments by $13.5 billion in second quarter

By Jennifer Lanning Drey

Portland, Ore., July 18 - Citigroup Inc. ended the second quarter with $24.2 billion of highly leveraged loan commitments, down from $37.7 billion at the end of the first quarter, Gary Crittenden, Citigroup's chief financial officer, said Friday during the bank's quarterly earnings conference call.

The current total includes $11.2 billion of funded loans and $13.0 billion of unfunded loans.

"We'll see how things play out and we'll manage this opportunistically as we go through the next few quarters," Crittenden said.

Essentially all of the loans were acquired in 2007, he said.

Citigroup took $428 million of pre-tax write-downs related to its highly leveraged loans during the second quarter.

Write-downs drop revenue

Write-downs and losses related to the continued disruption in the fixed-income markets led to a 29% decline in second-quarter revenues at Citigroup, Crittenden said.

"The fixed-income markets continue to be disrupted and investors remain weary, resulting in continued illiquidity in many product areas. As you have seen, we are aggressively managing our position to reduce our exposures," he said.

Citigroup reported a $2.5 billion net loss for the second quarter, which included $7.2 billion in pre-tax write-downs in securities and banking. The net loss was also driven by increased credit costs, Crittenden said.

In the bank's institutional clients group, lending revenues decreased 81% to $95 million, primarily driven by higher losses on credit default swap hedges, which were partially offset by a net recovery of $158 million, net of underwriting fees, on funded and unfunded highly leveraged finance commitments.

Net investment banking revenues were down 69%.

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