Citigroup ($C) Shocks the Street; Posts Earnings of $4.4 Billion for First Quarter

By Michael Bogan
Contributing Writer

Citigroup Inc. (NYSE: C) posted strong first-quarter fiscal results, providing more evidence that the big money center banks may have weathered the credit crisis storm.

The troubled bank said it earned $4.4 billion for the fiscal 2010 first quarter, compared with a loss of $696 million for the equivalent quarter last year. That is the the biggest profit for the bank since the second quarter of 2007.

The company cited proprietary trading of stocks, bonds and other securities for its surprise performance during the quarter. Citigroup, the largest bank affected by the financial crisis, said losses from outstanding loans declined during the quarter, allowing the bank to also reduce its loan loss provisions account.

Citigroup reported a 15 cents per share profit on revenue of $25.4 billion, easily surpassing the mean analysts’ estimate of a small loss, according to Thomson Reuters.

Total reserves to cover loan losses fell 22 percent, or $2.4 billion, a two-year low. Credit losses fell 15 percent to $8.4 billion, compared with nearly $10 billion for the fourth quarter of 2009. Improvements were reported for nearly all loan categories.

The company said it generated $8 billion in securities, banking operation and proprietary trading revenue, compared with $4.7 billion for the fourth quarter of 2009.

Citigroup’s lifeline from the Troubled Asset Relief Program (TARP) will be cut, as the company has paid back $20 billion of the $45 billion infusion from TARP during the credit crisis, with the remaining $25 billion of the government’s stake set to convert to securities and sold.

“All of us at Citi recognize that we would not be where we are without the assistance of American taxpayers,”Citigroup CEO Vikram Pandit said following the earnings release.

Citi’s surprise showing come on the heels of two similar results from its brethren banks, Bank of America Corporation and JPMorgan Chase & Company. Hopes of sustainable profits among the big banks were given a boost from Citi’s excellent results.

Pandit warned, however, that the company remains cautious “given the uncertain economic recovery and high unemployment in the U.S.”

“Realistically, we do not expect our performance to follow an invariable trend-line upward,” he said. “Longer-term, however, the prospects for Citi are clear and bright.”