Citigroup Regains Footing on Trading, Improved Loans

Citigroup’s performance in the first quarter improved – if an accounting adjustment cost is excluded – while the nation’s third-largest bank registered a big jump in fixed-income trading and improved loan quality.
Total trading revenue, excluding the “credit valuation adjustment,” or CVA, was $5.64 billion, an 11 percent gain compared to the same quarter last year, and nearly three times as much as the fourth quarter of 2011.
As with JPMorgan Chase and Wells Fargo, Citigroup’s revenues were bolstered by improving credit quality.
The loan-loss reserve of $1.2 Billion in the first quarter was down 65 percent from the prior year period.
Credit reserve releases of $588 million at Citicorp and $576 million at Citi Holdings were 67 percent and 63 percent lower, respectively, than the first quarter 2011.
Citicorp loans of $514 billion grew 12 percent, compared to the same period a year ago.
Citigroup’s first-quarter net income of $2.9 billion, or $1.11 per share, was up 7 percent from the same period in 2011, while revenue of $20.2 billion climbed 1 percent.
Citi’s per-share figure beat Wall Street’s consensus of $1.00, but drops to 95 cents when including a $1.3 billion decline from the accounting adjustment for tightening credit spreads, or CVA. The CVA expense comes as a result of an accounting rule that requires firms to write up the value of their own debts.
Chief Executive Officer Vikram Pandit is working on improving last year’s 10 percent revenue slump and dealing with the fallout following the Federal Reserve stress test in March.
Citi was one of four institutions that failed at least one of the criteria in the stress tests, which measured the capital requirements of the largest firms during a worse-case economic scenario.
“While the operating environment improved in the first quarter, there is still much macro uncertainty and we will continue to manage risk carefully. We will continue to leverage the depth and the scale of our global presence to serve our clients and grow our businesses,” said Citi CEO Vikram Pandit.

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