Citigroup Fourth Quarter is not a Kitchen Sink

Citigroup reported its earnings this morning and the stock is bouncing around like crazy. It was up about $0.50 right after the press release came out and then it tanked and went down as much as 3% to $28. It is now at $28.71.

There will no doubt be much to comment on after the call this morning, but here are a few tidbits from the press release. Most of this is from Schedule B:

1) Citigroup began the quarter with $54.6 billion of "direct Sub-prime Related exposure," and ended the quarter with $37.3 billion. Notice the use of the word "direct." Is there some indirect exposure?

2) Citigroup would have reported exposure of $47.8 billion without the $10.5 billion of hedges that it had during the quarter. Watch counterparty risk on this $10.5 billion.

3) The company recorded a $900 million reserve related to counterparty risk in the quarter. Citigroup cited a FAS 157 adjustment so it is not clear if this was simply an accounting adjustment or actual deterioration in the hedges it has against its portfolio.

4) Total sub prime writedowns of $18.1 billion during the quarter.

5) The remaining portfolio considered "sub prime."

ABCP/CDO $20.6
High grade $4.9
Mezzanine $3.6
ABS CDO-squared $0.2

6) The $20.6 billion of ABCP/CDO or Asset Backed Commercial Paper/ Collateralized Debt Obligations are considered to be level III assets and can't be valued using conventional methods - meaning by observable comparable transactions. This is a large worry for me.

I will have more to say after the conference call.