UPDATE: Citi 3Q Profit Soars As Credit Losses Decline
October 18 2010 - 9:57AM
Dow Jones News
Citigroup Inc. (C) managed to grow its core businesses broadly
in the third quarter. Revenue and profits rose from the
year-earlier period despite wobbly capital markets as Chief
Executive Vikram Pandit appeared to turn the ship in a new
direction.
The bank's third-quarter profit was $2.2 billion, up from $101
million a year earlier, with per-share profit of seven cents coming
in just above analysts' estimates. The amount the bank set aside
for credit losses fell. Revenue rose 2% from a year earlier, to $21
billion, but fell 6% from the second quarter.
To Pandit, the third consequtive quarterly profit is "continued
evidence that we are successfully executing our strategy and we
believe we have put in place all the elements for continued
profitability," he said in a press release. Citi was up 1% to $3.99
premarket.
Total credit-loss provisions were $5.92 billion, down from $9.1
billion a year earlier and $6.67 billion in the prior quarter. The
bank took $2 billion out of its reserve for future loan losses,
$500 million more than in the second quarter.
Citi's investment banking results were weaker; a falloff in
trading hurt results at J.P. Morgan Chase & Co. (JPM) and are
expected to hit Goldman Sachs Group Inc. (GS) and Morgan Stanley
(MS), the two large monoline investment banking firms. But its
stronger historical focus on debt underwriting cushioned the
decline from the strong second quarter. Capital markets revenue
rose 14% from a year earlier, and profits rose a strong 66%, to 1.4
billion. Consumer banking revenue rose 33% and that division's
profit rose 75%, to $1.2 billion.
Anemic loan demand, however, did not improve and the bank grew
its assets by adding investment securities. The legacy businesses
and assets in the Citi Holdings division it is selling or running
off continued to be a drag on results, more so in the third quarter
than in the second; Holding's loss was $1.1 billion.
Citi continued slimming itself down by splitting off assets of
late, recently selling $1.6 billion of retail credit-card assets to
General Electric Co. (GE) and agreeing to sell its 80%-owned
Student Loan Corp. (STU) to Discover Financial Services (DFS) as
part of a $600 million transaction, recording a $374 million loss
on the sale.
Citi's per-share earnings were 7 cents, compared with a
prior-year loss of 27 cents. Analysts polled by Thomson Reuters had
most recently forecast earnings of 6 cents on $21 billion in
revenue.
-By Matthias Rieker, Dow Jones Newswires; 212-416-2471;
matthias.rieker@dowjones.com
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