April 19 (Bloomberg) -- Citigroup Inc. said profit more than doubled as the global economic rebound trimmed costs for bad loans, trading revenue surpassed analysts’ estimates and the value of subprime mortgage bonds increased.
First-quarter net income of $4.43 billion followed a loss of $7.58 billion in the fourth quarter and a profit of $1.59 billion in the first three months of 2009, New York-based Citigroup said today in a statement. Adjusted per-share earnings were 14 cents. Analysts in a Bloomberg survey estimated the company would break even.
Chief Executive Officer Vikram Pandit, who is taking a $1 annual salary until the company turns consistently profitable, said in February that 2010 may show the “earnings potential of the new Citi” after two straight annual losses totaling $29 billion. Profit was the highest since the second quarter of 2007 as bad-loan costs fell 16 percent to $8.37 billion.
“They are now feeling themselves to be sufficiently reserved and they’re beginning to reduce credit expenses,” said Gary Townsend, president of Hill-Townsend Capital LLC, a Chevy Chase, Maryland-based investment firm, in an interview on Bloomberg Television. “That falls directly to the bottom line.”
Citigroup, which climbed 38 percent on the New York Stock Exchange this year before today, advanced 19 cents, or 4.2 percent, to $4.75 in composite trading at 9:46 a.m.
Assets Increase
The bank’s assets increased 8 percent to $2 trillion, after accounting rule makers closed a loophole that had allowed banks to keep credit-card loans and other debt instruments off their balance sheets.
Revenue from continuing operations shrank 5.8 percent to $25.4 billion, while consumer-banking revenue rose 3.1 percent to $8.08 billion, Citigroup said.
Chief Financial Officer John Gerspach said on a conference call with reporters that the company took $800 million of write- ups on subprime mortgage bonds. Writedowns on subprime bonds were among the biggest causes of Citigroup’s losses over the past two years.
“Our performance was aided by stability in the capital markets and improvement in the global business climate,” Pandit said in the statement.
Under bank accounting rules, bad-loan costs include charge- offs during the quarter as well as any increases or decreases of loss reserves for future defaults.
Charge-Offs
Charge-offs in the first quarter climbed to $8.38 billion from $7.28 billion. Overall, the bad-loan costs fell because the bank released $18 million from its reserves, compared with an increase a year earlier of $2.63 billion.
Revenue from trading and investment banking fell 34 percent to $8 billion. Citigroup had $6.59 billion of trading revenue, exceeding Credit Suisse Group AG analyst Moshe Orenbuch’s estimate of $5 billion.
The bank had $1.06 billion of mergers-advisory and underwriting revenue. Orenbuch forecast $1.1 billion.
Citigroup Vice Chairman Edward “Ned” Kelly will become chairman of the investment-banking division, according to an internal memo obtained by Bloomberg News and confirmed by spokeswoman Danielle Romero-Apsilos.
Revenue in Citigroup’s global transaction services division, which manages bank accounts for corporations and acts as securities custodian for fund managers, was $2.44 billion, up from $2.37 billion.
The Citi Holdings division, which includes businesses that Pandit has said he wants to exit, had revenue of $6.55 billion, compared with $4.06 billion a year earlier.
Government’s Stake
Citigroup, which had to get a $45 billion bailout in 2008, repaid $20 billion of the funds in December. The remaining $25 billion was converted by the Treasury Department into 7.7 billion Citigroup shares, which have a market value of about $35 billion.
“All of us at Citi recognize that we would not be where we are without the assistance of American taxpayers,” Pandit said in the statement. He said the company was “gratified” to be able to repay the government “with a substantial return, as well as create a significant increase in the value of their equity in Citi.”
JPMorgan Chase & Co.’s first-quarter profit climbed 55 percent from a year earlier, and Bank of America Corp.’s fell 25 percent. Goldman Sachs Group Inc. reports earnings tomorrow and Morgan Stanley is scheduled for April 21.
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