MercoPress. South Atlantic News Agency

Citibank first quarter pleasant surprise for banking sector

Citigroup reported on Friday its first quarterly net profit in nearly two years, the latest US bank to see an improvement in its performance. It made a profit of 1.6 billion US dollars compared with a loss of 5.1 billion a year earlier. Revenues rose 99% to 24.8 billion.

However, once dividend payments to preferred shareholders were taken into account, it suffered a near one billion USD loss. Shares in the banking giant initially rose, before falling into negative territory, losing 6% in New York.

“We had our best overall quarter since the second quarter of 2007,” chief executive Vikram Pandit said.

Citigroup made a pre-arranged 2.7 billion USD dividend payment to preferred shareholders, and said it had made a 7.3 billion credit loss from bad loans. But it gained from an accounting rule that allowed the bank to post a one-time gain of 2.5 billion USD. The bank also said it had seen an improvement in trading activity and it had cut costs.

Citi's results came hot on the heels of positive earnings reports from Wells Fargo, Goldman Sachs and JP Morgan.

“Of course the fact that all of these have had such a strong first quarter has led to some tentative hopes that perhaps the banking sector crisis is bottoming,” said Richard Hunter, head of UK equities at Hargreaves Lansdown.

Citigroup has received 45 billion in government aid from the Troubled Asset Relief Program (Tarp). The bank has also cut the size of its workforce to 309.000 people from 374.000 at its peak.

“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. But Citi's problems are not over yet, he added.

“There's no doubt the challenges are still enormous for Citigroup.”