|The strong showing by Citigroup, which earned 15 cents per share on revenue of $25.4 billion, follows similar results last week by Bank of America Corp. and JPMorgan Chase & Co. (Richard Drew/ Associated Press)|
Surprise profit at Citigroup boosts hopes
Bank posts best quarter since ’07
NEW YORK — Citigroup Inc. provided more evidence yesterday that the nation’s big banks may have turned a corner. The bank reported a surprise first-quarter profit as trading revenue offset losses from failed loans.
Citigroup said it earned $4.4 billion after payment of preferred dividends, compared with a loss of $696 million a year earlier. That was the bank’s biggest quarterly profit since the second quarter of 2007.
The company cited strong trading of bonds, stocks, and other securities for its big profit. Citigroup, one of the hardest hit banks during the credit crisis and recession, said losses from bad loans fell for the third consecutive quarter. It also set aside less money for loan losses.
“Loan losses coming down with growth of top-line revenue speaks to the overall recovery,’’ said Oliver Pursche, executive vice president at Gary Goldberg Financial Services and co-portfolio manager of the GMG Defensive Beta Fund, which holds shares in Citigroup, but is not currently buying shares.
Citigroup earned 15 cents per share on revenue of $25.4 billion. That easily beat analysts expectations of a slight loss, according to Thomson Reuters.
Citigroup’s strong showing follows similarly impressive results last week by Bank of America Corp. and JPMorgan Chase & Co. That has boosted hopes that the worst of the credit crisis has passed and banks may be entering a period of sustained profitability.
Yet Vikram Pandit, chief executive officer, sought to dampen short-term expectations for Citigroup, saying the bank remained cautious “given the uncertain economic recovery and high unemployment in the US.’’ “Realistically, we do not expect our performance to follow an invariable trendline upward,’’ he said. “Longer-term, however, the prospects for Citigroup are clear and bright.’’
Pandit sounded a little less upbeat about the economy than his counterparts at JPMorgan Chase and Bank of America. But Citigroup’s recovery from the devastation of the financial markets has been more difficult.
Analysts were more positive than the CEO about the outlook for the bank.
Michael Williams, director of research at Gradient Analytics, said Citigroup’s balance sheet is very healthy. The bank’s reserves for future losses are stronger than other banks like JPMorgan Chase and Bank of America, which provides it better protection moving forward, he said.
“They’re the brightest of all the big banks these days,’’ because of their strong balance sheet, Williams said.
Citigroup said its total reserves to cover losses from bad loans fell 22 percent, or $2.4 billion, from the fourth quarter to its lowest level in two years.
The company said its credit losses fell 15 percent to $8.4 billion from almost $10 billion in the fourth quarter.