A Very Bad Year
In this case, we should discuss whether I would eliminate all or part of following items when assessing current profitability and forecasting future earnings of Citi.
Principal transactions
This part cannot be eliminated. Principal transactions revenue consists of realized and unrealized gains and losses from trading activities. The principal transactions of Citi consists of fixed income, credit products, equities, foreign exchange, commodities, consumer banking, global wealth management, corporate and others, all these section have further affection on the company and this shows in the income statement for forecasting. So the principal transactions cannot be eliminated from the income statement.
Realized (gain) losses from sales of investments
This part cannot be eliminated. The investment activity of the bank is an important part of its operating activity. The gain or loss of the sales of investment both has affection on the final income statement. Also, this gain or loss has influence on the future forecasting. So the realized (gain) losses from sales of investment cannot be eliminated from the income statement.
Provision for loan losses
This part cannot be eliminated. The set of provision for loan losses is due to the preparation for the bad debt. For example, if the client cannot pay back the loan and just declared bankrupt, this loan becomes a bad debt. Without the provision for loan losses, the risk of the liquidity of the bank is increase and it may get into trouble of capital chain breakup due to the loan loses. So the provision for loan losses cannot be eliminated from the income statement.
Restructuring
This part cannot be eliminated. The treatment of restructuring charges in analyzing profitability and assessing earnings persistence is important because recessionary conditions often induce