By Jonathan Stempel and Dan Wilchins
NEW YORK (Reuters) - Housing and credit market turmoil drove Citigroup Inc to its fourth straight quarterly loss and $13 billion of write-downs and credit losses, but the giant U.S. bank still wants to acquire deposits after its bid to acquire much of Wachovia Corp failed.
Citigroup, until this quarter the nation's the largest by assets, is in a difficult spot because it is experiencing rising losses from traditional lending operations, such as U.S. credit cards, even as losses continue from repackaged mortgage debt and other securities on its balance sheet.
On top of this, emerging markets, a key engine of Citigroup's growth, are becoming much less profitable and in some countries are big money losers.
Chief Financial Officer Gary Crittenden said in an interview that losses are entering a new phase, moving away from securities writedowns, which can make earnings volatile, and toward consumer losses, which tend to rise more gradually.
"That's an important shift," Crittenden said, adding that "we would have interest in looking at businesses like" Wachovia, where the bank could add U.S. deposits without substantial downside risk.
Citigroup investors are looking for signs of stability after the bank posted losses of $20.3 billion in the last year and more than $71 billion worth of writedowns and credit losses over five quarters.
The bank's effort to buy Wachovia's retail and investment banking businesses for $2.16 billion cheered some analysts, who had long pressed the bank to boost its U.S. deposit base, which can provide stable funding. Wells Fargo & Co beat out Citigroup with a $15.1 billion bid for all of Wachovia.
"We are in an environment where more deposits is better than less," said Michael Holland, who oversees more than $4 billion at Holland & Co and does not own Citigroup stock.
JPMORGAN PASSES CITIGROUP IN ASSETS
Citigroup's third-quarter net loss totaled $2.82 billion, or 60 cents per share, compared with a profit of $2.21 billion, or 44 cents, a year earlier. Its loss from continuing operations was $3.42 billion, or 71 cents per share, compared with analysts' average estimates of a 70 cent a share loss.
Revenue fell 23 percent to $16.68 billion. Expenses totaled $14.43 billion, up 2 percent from a year earlier, but down 8 percent from the second quarter.
Citigroup shed $50 billion in assets during the third quarter, ceding its title as the largest U.S. bank by assets to JPMorgan Chase & Co. Chief Executive Vikram Pandit is looking to shed $400 billion of assets to strengthen the bank's balance sheet.
JPMorgan ended September with $2.25 trillion in assets, compared with $2.05 trillion at Citigroup. Bank of America Corp would pass both if it completes its planned acquisition of Merrill Lynch & Co Inc in early 2009.
Citigroup also cut 11,000 jobs during the quarter, leaving it with 352,000 employees.
The bank's shares fell 33 cents, or 2 percent, to close at $15.90 on the New York Stock Exchange and are down 46 percent this year. The KBW Bank Index rose 2.6 percent on Thursday and broad U.S. market indexes rose more than 4 percent.
CONSUMER CREDIT DETERIORATES
Quarterly results reflected $4.42 billion of net writedowns tied to mortgage debt, leveraged loans and other investments, and a $612 million charge for a regulatory settlement related to auction-rate securities.
Citigroup also reported an 86 percent increase in credit costs to $9.1 billion, including $4.92 billion in net credit losses and a $3.9 billion increase in loan loss reserves.
On a conference call, Crittenden said there was broad deterioration in consumer credit worldwide, with particular stress in Brazil, India and Mexico. The bank operates in more than 100 countries.
Credit losses have spurred Citigroup to raise more than $40 billion in capital from investors.
The bank is also receiving $25 billion from the U.S. Treasury Department's Troubled Asset Relief Program, one of nine banks to receive initial injections.
"Being handed $25 billion means they don't have to come to the market and I think that's huge," said Anton Schutz, president of Mendon Capital Advisors Corp in Rochester, New York, which owns Citigroup shares.
Citigroup's Tier-1 capital ratio, a measure of its ability to cover losses, was 8.2 percent as of September 30, compared with 8.74 percent three months earlier and 7.12 percent at the end of 2007. Regulators consider 6 percent sufficient.
In the interview, Crittenden said the bank has no compelling need to raise more capital now.
He offered few details on how the bank will use the new capital, but said Citigroup wants to expand in retail banking, credit cards, investment banking and trading, wealth management and transaction services.
(Additional reporting by Joseph A. Giannone; Editing by Jeffrey Benkoe and John Wallace)
