NEW YORK: Citigroup Inc's first-quarter profit fell 32 percent as shrinking loans and poor trading results pressured revenue while expenses surged, according to a Reuters report on Monday, April 18.
The results highlighted how the third-largest U.S. bank, which teetered on the brink of collapse in the financial crisis, has stabilized but is still struggling to generate real growth.
The results were better than expected, which supported Citigroup's stock on a day when the U.S. equity market was falling. But like other big banks, the company's profit came mainly from dipping into money previously set aside to cover bad loans.
"We're not seeing a lot of revenues being thrown off by main businesses ... They haven't been able to turn recovery into growth," said Len Blum, a managing partner of investment firm Westwood Capital, who personally owns bank stocks.
All three of the biggest U.S. banks -- Bank of America, JPMorgan Chase and Citigroup -- have posted shrinking loan books for the first quarter, raising questions about the strength of U.S. economic growth.
The biggest boon for banks right now is that credit losses are dropping. Citigroup's credit losses fell 25 percent in the quarter and steadily declined all last year.
Citigroup is among the most international of the major U.S. banks, and that helped some businesses in its Citicorp unit, where the bank houses the operations it plans to continue operating over the long term.
That unit's Latin American consumer banking, investment banking and transaction-processing services all posted higher income from continuing operations, for example, even as North American investment banking and transaction-processing operations posted profit declines.
BEATING ESTIMATES
Overall, Citigroup earned $3.0 billion, or 10 cents per share, in the first quarter, beating analysts' average forecast of 9 cents a share, according to Thomson Reuters I/B/E/S. A year earlier it earned $4.4 billion, or 15 cents per share. - Reuters
Revenue dropped 22 percent, including a 29 percent drop in its fixed income trading revenue. [ID:nN18189626]
The slump in trading revenue reflected a volatile quarter in the markets, driven by Middle Eastern political upheaval and a Japanese earthquake and tsunami. That market environment is also expected to dampen profits at top U.S. investment banks Goldman Sachs Group Inc and Morgan Stanley, which report their quarterly results later this week.
On a conference call with investors, Chief Executive Vikram Pandit said the bank is building its investment banking franchise. Operating expenses rose 7 percent to $12.33 billion.
It is a reversal for Pandit, who spent his first few years at the helm slashing costs in an effort to right the foundering bank.
Under prior executive Charles "Chuck" Prince, investors and analysts criticized the bank for having bloated expense levels even when revenue was rising.
The results highlighted how the third-largest U.S. bank, which teetered on the brink of collapse in the financial crisis, has stabilized but is still struggling to generate real growth.
The results were better than expected, which supported Citigroup's stock on a day when the U.S. equity market was falling. But like other big banks, the company's profit came mainly from dipping into money previously set aside to cover bad loans.
"We're not seeing a lot of revenues being thrown off by main businesses ... They haven't been able to turn recovery into growth," said Len Blum, a managing partner of investment firm Westwood Capital, who personally owns bank stocks.
All three of the biggest U.S. banks -- Bank of America, JPMorgan Chase and Citigroup -- have posted shrinking loan books for the first quarter, raising questions about the strength of U.S. economic growth.
The biggest boon for banks right now is that credit losses are dropping. Citigroup's credit losses fell 25 percent in the quarter and steadily declined all last year.
Citigroup is among the most international of the major U.S. banks, and that helped some businesses in its Citicorp unit, where the bank houses the operations it plans to continue operating over the long term.
That unit's Latin American consumer banking, investment banking and transaction-processing services all posted higher income from continuing operations, for example, even as North American investment banking and transaction-processing operations posted profit declines.
BEATING ESTIMATES
Overall, Citigroup earned $3.0 billion, or 10 cents per share, in the first quarter, beating analysts' average forecast of 9 cents a share, according to Thomson Reuters I/B/E/S. A year earlier it earned $4.4 billion, or 15 cents per share. - Reuters
Revenue dropped 22 percent, including a 29 percent drop in its fixed income trading revenue. [ID:nN18189626]
The slump in trading revenue reflected a volatile quarter in the markets, driven by Middle Eastern political upheaval and a Japanese earthquake and tsunami. That market environment is also expected to dampen profits at top U.S. investment banks Goldman Sachs Group Inc and Morgan Stanley, which report their quarterly results later this week.
On a conference call with investors, Chief Executive Vikram Pandit said the bank is building its investment banking franchise. Operating expenses rose 7 percent to $12.33 billion.
It is a reversal for Pandit, who spent his first few years at the helm slashing costs in an effort to right the foundering bank.
Under prior executive Charles "Chuck" Prince, investors and analysts criticized the bank for having bloated expense levels even when revenue was rising.
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