Citigroup posts smaller loss

File photo of a man entering a Citibank branch in Tokyo. - Reuters pic
NEW YORK, April 17 - Citigroup said today cost-cutting efforts and improved investment banking and trading results led to a substantially smaller first-quarter loss, despite a big increase in credit costs from consumer banking and credit cards.

The bank also said it planned to delay the proposed exchange of billions of dollars of preferred shares into common stock until the US government completes its "stress tests" of large banks to gauge which might need more capital or aid.

Citigroup's quarterly loss available to common shareholders was US$966 million (RM3,477 million), or 18 cents per share, compared with a loss of US$5.19 billion, or US$1.03, a year earlier. Revenue roughly doubled to US$24.79 billion.

Shares rose 50 cents, or 12.5 per cent, to US$4.51 in pre-market trading.

Analysts on average expected a loss of 30 cents per share on revenue of US$21.73 billion, according to Reuters Estimates. Results came a day after JPMorgan Chase & Co (JPM.N: Quote, Profile, Research) posted higher-than-expected profit.

Citigroup has been propped up three times by the government since October, taking US$45 billion from the Troubled Asset Relief Program and getting a government agreement to share in losses on US$300.8 billion of troubled assets.

"It was slightly better than anticipated, but we probably underestimated how much government support would be a wind at their back," said Michael Holland, founder of Holland & Co in New York. "The challenges are still enormous.

In the context of what we heard from JPMorgan yesterday with its continuing concerns about the consumer, Citi is going to suffer too."

Excluding the impact of preferred stock, Citigroup said quarterly profit was US$1.59 billion, compared with a US$5.11 billion year-earlier loss. Citigroup said operating expenses fell 23 per cent, and that its workforce shrank by 13,000 in the quarter to 309,000.

"We have lowered risk and dramatically reduced the problem legacy assets that have caused many of our losses," Chief Executive Vikram Pandit said. "We have meaningfully lowered expenses and headcount and improved efficiency."

Pandit said results were the best since the second quarter of 2007. The bank lost US$37.5 billion in the prior five quarters.

Results included a US$2.5 billion gain on some derivative obligations, as the market's perception of the bank's credit weakness in theory left Citigroup less likely to have to make good on these obligations.

They also included US$10.3 billion of credit costs, up 76 per cent, with a large portion of the increase stemming from credit cards. This included US$7.3 billion of net credit losses, a US$2.7 billion increase to loss reserves, and US$332 million for other benefits and claims.

SPLIT

Pandit in January split Citigroup into Citicorp, which includes businesses that the bank wants to keep, and Citi Holdings, which includes brokerage and insurance units, bad debt and other assets that the bank wants to shed.

There has been speculation that Pandit would need to quickly improve results, and that Citigroup would not need more government aid, to ensure that federal regulators let him keep his job, which he assumed in December 2007.

Citigroup's institutional clients group, which includes investment banking, swung to a US$2.83 billion profit from a year-earlier loss, helped by strong results from fixed-income trading.

Consumer banking lost US$1.23 billion, reflecting increased credit losses, including in residential real estate. Credit card operations saw profit fall by two-thirds to US$417 million, though North America posted a loss.

Through Thursday, Citigroup shares had fallen 40 per cent this year, compared with a 19 per cent drop in the KBW Bank Index .BKX. Citigroup had traded above US$56 as recently as January 2007.