NEW YORK (AP) - Citigroup has a world of problems.
The bank is proud of its global reach - 1,400 branches in 46 countries. But in Asia, the economies of China and India are slowing. And Europe, the source of one in three dollars that Citi brings in, may be on the brink of financial disaster.
Citi's rivals JPMorgan Chase and Bank of America have Europe problems, too, but they also have U.S. branch networks about five times the size of Citi's. And bank business in the U.S., like the economy, is improving.
Wells Fargo has hardly any European business at all, and was rewarded Tuesday with a small gain in its stock price after reporting impressive quarterly earnings. Citi disappointed Wall Street and got pummeled, down 8 percent.
Being worldly isn't so sexy anymore.
"The effect of a contagion from Europe will be catastrophic for Citi," said Jeffrey Sica, chief investment officer of Sica Wealth Management, an independent wealth manager.
At year's end, Citi held $33.4 billion in debt issued by European countries and loans to businesses in debt-hobbled countries such as Greece, France, Belgium and Ireland.
While comparisons are difficult because banks have different standards for judging "exposure," Fitch Ratings, a prominent credit rating service, said in November that Citi was the most exposed of the big U.S. banks.
"Europe remains a dark cloud," John Gerspach, Citi's chief financial officer, told reporters after the financial results were released. But he said the bank had hedged its bets well and was "highly confident" that the losses would be contained.
Appetite for risk has gotten the bank in trouble before. Of the major U.S. banks, Citi was hit hardest by the 2008 financial crisis. It had to be bailed out by the federal government twice, for $45 billion cash and guarantees worth hundreds of billions more.
It posted about $40 billion in losses in 2008 and 2009 combined. For a time, it was majority-owned by the U.S. government, and it was the last major bank to repay the bailout money, at the end of 2010.
Investors have been appalled by the bank's inability to rein in costs. Just last quarter, Citi set aside 3 percent more to pay its bankers, $6.4 billion, even though the bank's revenue fell 7 percent and investment banking revenue dropped 45 percent.
Citi said its investment banking revenue fell because the choppy stock and bond markets late last year made it harder to make money on underwriting fees and giving advice on mergers and acquisitions.
But Betsy Graseck, a bank analyst at Morgan Stanley, noted that Citi's investment banking results were worse than JPMorgan's, released last week, and missed her estimate by 31 percent.
And that was before this year's regulations that curb how much banks can trade for their own accounts as opposed to trading for their clients. Regulations this year also limit how much U.S. banks can invest in hedge funds.
Sica, the wealth manager, said the biggest problem with Citi is that its CEO, Vikram Pandit, has not charted how the bank will maneuver through Europe's debt problems and how it will grow.
"Pandit has proven to be an ineffective CEO for Citigroup and failed to outline a believable plan," he said.
In a conference call with investors, Pandit said: "The future isn't easy to predict ... but we believe we are prepared."
Investors are not so sure. Citi's stock has plummeted 28 percent in six months because of concerns about the losses Citi would suffer if the Greek government couldn't pay its debts and the European debt crisis became a global financial panic.
The bank's results included a $400 million severance charge due from cutting 5,000 jobs. The bank also increased its legal expenses by $550 million to prepare for litigation related to mortgages and credit card loans.
Citigroup's broad international profile helped its results in some places. Its business and consumer loans grew 14 percent to $465 billion, with most of the growth coming from Latin America and Asia.
As Americans pay down debt, the bank's credit card portfolio is improving. The number of Citi customers late with payments by 90 days or more fell 30 percent from the same period a year earlier.
Its losses from loans fell 40 percent, a bigger decline than the bank had anticipated. That allowed Citi to take a profit of $1.5 billion from the reserves the bank had kept aside for such losses.
But the volatile stock and bond markets in the fourth quarter led to a decline of 45 percent in Citi's investment banking revenue, to $638 million. Citi, one of the worst-hit banks during the financial crisis, has been reducing the toxic loans in its