Net income was $3.81 billion, or $1.23 a share, compared with $2.93 billion, or 95 cents, in the same period last year, the New York-based lender said today in a statement. Profit was $1.29 a share excluding an accounting adjustment. The average estimate of 23 analysts surveyed by Bloomberg was $1.17 a share in adjusted earnings.
Chief Executive Officer Michael Corbat, 52, who oversaw his first full quarter since replacing Vikram Pandit in October, is firing workers and closing branches as he seeks to make Citigroup more efficient. Bond-trading and investment-banking revenue was aided by a decline in reserves for loan losses, which bolstered earnings.
“It is critical that Citi be viewed as an indisputably strong and stable institution, and we made progress towards that goal,” Corbat said in the statement. “The environment remains challenging and we are sure to be tested as we go through the year.”
Revenue rose to $20.5 billion from $19.4 billion in the same quarter last year. Excluding accounting adjustments, revenue was $20.8 billion. The average estimate of 16 analysts surveyed by Bloomberg was $20.2 billion. Expenses climbed 1 percent to $12.4 billion, “mainly reflecting an increase in legal and related costs and repositioning charges,” the bank said.
Share Performance
Shares of the company rose to $45.25 at 8:20 a.m. in New York from $44.78 on April 12. The stock has gained 13 percent this year.
JPMorgan Chase & Co., the biggest U.S. bank, last week reported a 33 percent jump in first-quarter net income to $6.53 billion. Wells Fargo & Co., the fourth-biggest, said profit rose 22 percent to $5.17 billion. Both lenders used expense cuts to boost their earnings as revenue fell.
Corbat oversaw a so-called loan-loss reserve release of $652 million, allowing his bank to boost profit with funds that had been designated to cover future costs on bad loans. David Trone, an analyst with JMP Securities LLC, had expected a $420 million release while Richard Staite, an analyst in London with Atlantic Equities LLP, had predicted $175 million.
Securitized Products
The division that contains Citigroup’s trading and investment-banking units, overseen by Co-President Jamie Forese, reported a $2.31 billion profit, compared with $1.28 billion a year earlier.
Revenue from trading bonds declined 3 percent to $4.6 billion, excluding adjustments, from the same period last year, Citigroup said. Trone had estimated $3.2 billion. Moshe Orenbuch, a Credit Suisse Group AG analyst, predicted $4.2 billion.
The bank cited growth in “securitized products” for the performance in fixed-income trading. The unit, run by Jeffrey Perlowitz and Mark Tsesarsky, deals in products such as mortgage-backed securities. Revenue from rates trading and currencies declined, the bank said.
Citigroup’s fixed-income trading business was the second-biggest in the world in 2012, according to research from analytics firm Coalition Ltd. The division employs Andy Morton, interest-rates trading head, Carey Lathrop, head of credit- trading, and Howard Marsh, who leads municipal bond trading.
Underwriting Business
Investment banking, which includes advising clients on mergers and acquisitions and helping them sell shares and bonds to the public, posted revenue of $1.1 billion, a 22 percent increase. Staite at Atlantic Equities had estimated revenue of $920 million.
Citigroup’s underwriting unit, run by Tyler Dickson, benefited as investors bought more junk bonds and shares through public offerings. The bank helped clients sell $12.3 billion of junk bonds in the quarter, compared with $10.6 billion a year earlier, according to data compiled by Bloomberg.
The firm underwrote $14.2 billion of global share sales, 23 percent more than the same quarter in 2012, the data show.
The consumer bank, run by co-president Manuel Medina-Mora, 62, posted a $1.95 billion profit, compared with $2.18 billion in the same quarter last year. Staite had predicted $2.1 billion.
Citi Holdings
Revenue at the division, which had operations in almost 40 countries last year, was almost unchanged at $10 billion. Staite had estimated $10.3 billion.
Citigroup’s advisory unit, overseen by Raymond J. McGuire, garnered $204 million in fees from advising clients on mergers and acquisitions in the quarter, compared with $110 million a year earlier.
Citi Holdings, the part of the bank that contains distressed and unwanted assets, posted a $794 million loss, down from $1.02 billion a year earlier. Assets at the division, overseen by Eugene “Gene” McQuade, 64, fell 29 percent to $149 billion.
The bank had a loan-loss reserve release of $351 million in the Citi Holdings unit.
Source: http://www.bloomberg.com/news/2013-04-15/citigroup-profit-rises-30-as-fixed-income-unit-beats-estimates.html
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