Citigroup Earnings Fall 32%
By ERIC DASHTwo years after being on the verge of collapse, Citigroup squeezed out a $3 billion profit as it contended with a series of mortgage troubles and sluggish economic growth across the globe.
While Citigroup topped analysts’ consensus estimates by a penny with earnings of 10 cents a share, its earnings fell 32 percent from the period a year earlier, when Citi reported earnings of 15 cents a share, or $4.4 billion. That was the bank’s first profitable quarter since the financial crisis.
Citi’s results were buoyed by the release of $3.3 billion of reserves that had previously been set aside to cover credit card and other loan losses. The move helped offset deeper losses in its domestic mortgage unit and weaker trading results.
Unlike previous quarters, when strong results overseas helped lift earnings, nearly every major region and business except Latin America experienced a slowdown. Over all, revenue fell 22 percent, to $19.7 billion, during the period.
Finding new sources of growth is crucial to the company’s turnaround, especially given the still-anemic recovery in the United States and uncertainty in Europe, Japan and the Middle East. But Vikram S. Pandit, Citigroup’s chief executive, said that he was pleased with the bank’s first quarter showing.
“After a full year of profitability, we continue to make progress in 2011 by executing our strategy with discipline,” Mr. Pandit said in a statement.
Mr. Pandit is expected to give more details on Thursday, when he addresses investors at Citigroup’s annual shareholder meeting in Midtown Manhattan. The bank also is planning a 10-for-1 reverse stock split early next month that will almost certainly draw criticism from stockholders.
Citigroup’s earnings were dampened by the same factors that weighed on the results of Bank of America and JPMorgan Chase last week. Despite the solid performance of the Wall Street businesses and improvement in credit quality, its traditional banking businesses have been hit by foreclosure troubles, new financial regulations and a slowdown in home loan growth. Wells Fargo and several big regional players are expected to report similar challenges when they announce their results later this week.
Citigroup, whose stock price plummeted during the financial crisis, has been under intense pressure to perform.
For the last three years, Mr. Pandit has been engaged in an ambitious plan to overhaul the troubled company, streamlining its sprawling operations and transforming it from a global financial supermarket into a leaner, more focused lender
At the urging of regulators, he replaced over half of the directors on Citi’s board, overhauled its risk management system, and reduced its size. Today, the pile of assets that Citi plans to sell or divest is down to $337 billion, less than half of its peak of $827 billion in early 2008.
Citi is close to completing its plan to shrink its balance sheet. The last big piece that remains, CitiFinancial, its large consumer lending franchise, is on the block and several private equity firms are in the final stages of bidding for the group.
Federal regulators similarly acknowledged Citi’s progress when they greenlighted Mr. Pandit’s plan to reinstate the dividend at a token one-tenth of a penny per share. But unlike several major competitors that announced large share buyback programs, Mr. Pandit has said that the bank is unlikely to do so until sometime in 2012.
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