Citigroup's (C) Pandit Says Largely Through Mark-To-Market Losses; Paying Back TARP More About Timing Then Capacity

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Citigroup's (NYSE: C) CEO Vikram Pandit presented today at the Barclays Capital Global Financial Services Conference discussing the company's restructuring, loan losses and its capital structure, including the government's stake.

Commenting on credit, Pandit explained that they believe they are largely through this first stage of mark-to-market losses as they've seen growing stability and some appreciation in asset pricing. Pandit said current losses are largely coming from the second stage of a credit cycle, which is a consumer credit cycle. Pandit wouldn't comment on the credit trends they are seeing for the current quarter (Q3), but he noted that in Q2 they and others saw early stages of moderating credit losses and intra-quarter statistics like industry Master Trust data have continue to underscore this early trend. Pandit notes that if indeed consumer credit losses continue to moderate, it will have a positive impact on reserve builds. Pandit said the last stage of the credit crisis, the third stage, is commercial real estate and ARMs and corporate loans. Discussing concerns about commercial real estate, Citi referred to statistics in the government's stress test which showed that the commercial real estate losses inscribed to them was about $2.7 billion, which compared favorably with competitors --- two of which were up in the $8.5 to $9 billion range.

On the capital structure and U.S. government's position, Pandit noted that the a large chuck of the government's preferred stock in Citi was recently converted into stock at $3.25 per share, which he is proud to say represents a nice profit. Pandit confirmed that the government's holding of common stock are not restricted and they can sell it entirely at their discretion. Pandit said the that leaves the U.S. government with $20 billion of trust preferred securities. Pandit said paying this remaining balance of TARP back is more about timing then capacity. He said they could pay it back now and they would still have very good Tier 1. He anticipates paying that once they see more concrete signs of the recovery. Pandit also notes that there is a technical required that if you want to pay back TARP that you have to somehow demonstrate technically access to capital.

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