NEW YORK: Citigroup Inc reported a higher than expected 31% rise in first quarter (1Q) profit yesterday as revenue from its securities and investment banking business swelled.
The No 3 US bank said yesterday that net income rose to US$3.8 billion (RM11.5 billion), or US$1.23 per share, in the period — the first full quarter under chief executive Michael Corbat — from US$2.9 billion, or 95 US cents per share, a year earlier.
“During the quarter, we benefited from seasonally strong results in our markets businesses, sustained momentum in investment banking, continued year-over-year growth in loans and deposits in Citicorp, and a more favourable credit environment,” Corbat said in a statement.
Under Corbat, Citigroup partly recovered from its embarrassing failure last year under former CEO Vikram Pandit to win approval from the Federal Reserve after a stress test for its plan to distribute capital. Citigroup shares were up 2.7% at US$46 before the bell.
The company scored higher capital levels on a new test and received approval in March for its cautious application to spend US$1.2 billion on stock buybacks. Citigroup has not asked to raise its quarterly dividend from its nominal level of one cent per share.
Excluding certain accounting adjustments, net income rose to US$4 billion, or US$1.29 per share, in the latest quarter, from US$3.4 billion, or US$1.11 per share, a year earlier. Analysts on average had forecast earnings of US$1.17 per share before the certain accounting adjustments.
Total revenue rose 6% to US$20.5 billion. Expenses fell 10% to US$12.4 billion from 4Q.
The bank said its net interest margin for the first quarter was 2.94%, up marginally from 2.93% in 4Q.
Citigroup, which is reviewing some of its weaker operations around the world, said revenue from its securities trading and investment banking business rose 31% to US$6.98 billion.
The results were also lifted by the release of US$652 million in loss reserves, of which US$351 million was from the Citi Holdings portfolio that is largely composed of mortgage assets. These assets are tied to US house prices, which have been rising.
Under Corbat, who took over October, Citigroup took a more cautious approach on loan loss reserves in 4Q, releasing just US$86 million.
The profit contributed to an increase in Citigroup’s Basel III Tier 1 common equity ratio, a key regulatory measure of capital, to 9.3% at the end of March from 8.7% three months earlier, the company said.
“All they have to do is a get a little better, and they can get back to a valuation closer to their competitors,” said Mark Mandell, portfolio manager at Dalton Investments in Santa Monica, California, which owns Citigroup shares.
Citigroup’s adjusted results exclude the impact of changes in value of debt and obligations of its trading partners.
This article first appeared in The Edge Financial Daily, on April 16, 2013.
Written by Reuters
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