Citigroup Q1 results top Wall Street forecasts

Citigroup Q1 results top Wall Street forecasts

By Madlen Read, AP Business Writer

NEW YORK — Citigroup's(C) problems are far from over, but Friday it reported its smallest quarterly loss since 2007.

The bank released first-quarter results Friday that were buoyed largely by strong revenues from bond trading, but that burst of activity is not expected to continue. And Citigroup also said it's still facing loan losses that are expected to increase throughout this year.

Citigroup became the fourth bank in a week with earnings news that pointed toward a recovery in the banking industry after the devastation caused by the mortgage and credit crisis and the recession. But the outlook for the industry is still difficult because the global recession is causing defaults in mortgages, credit cards and commercial real estate loans

Chief Financial Officer Ned Kelly said in a conference call with investors that certain consumer delinquency rates have been moderated, but he still expects loan losses to worsen before they improve.

"The elephant hasn't made its way through the python," Kelly said.

The bank posted a first-quarter loss to common shareholders of $966 million after massive loan losses and dividends to preferred stockholders. However, before paying those dividends, which were tied to the government's investment in Citigroup, the bank earned $1.6 billion.

Citigroup's results topped analyst forecasts. The company reported a loss per share of 18 cents, which was narrower than the 34 cents analysts predicted, according to Thomson Reuters. A year ago, Citigroup suffered a loss of more than $5 billion, or $1.03 a share.

Separately, Citigroup said Friday it is delaying the government's exchange of billions of dollars worth of preferred shares into common shares until the government completes its "stress test." The government has been gauging the health of U.S. banks, and the results are expected in early May.

Citigroup's revenue doubled in the first quarter from a year ago to $24.8 billion thanks to strong trading activity in its investment bank. Its credit costs were high, though — at $10 billion — due to $7.3 billion in loan losses and a $2.7 billion increase in reserves for future loan losses.

Citigroup has been the weakest of the large U.S. banks, posting quarterly losses since the fourth quarter of 2007. But in March, CEO Vikram Pandit triggered a stock market rally after he said that January and February had been profitable for Citigroup.

Citigroup's better-than-expected report on Friday came after surprisingly solid earnings from JPMorgan Chase, Goldman Sachs Group, and Wells Fargo over the past several days. While recent results from these healthier banks have brought some relief to investors, many have been waiting to see how more troubled banks such as Citigroup have fared.

Pandit said in a statement Friday that he was "pleased" with Citigroup's performance.

"While we and the industry face challenges in the coming quarters as we work through the weak economy, we will remain focused on strengthening the Citi franchise," he said.

One concern among investors is that the strong trading activity seen by banks in the first quarter was a one-time event — the first quarter saw a surge in corporate bond issuance as the credit markets started thawing from 2008's frozen fourth quarter. Even JPMorgan CEO Jamie Dimon acknowledged Thursday that trading activity is unlikely to remain so robust.

The question is whether banks like Citigroup can find other ways to offset loan losses, which nearly all economists and bankers agree will keep rising throughout the year as the unemployment rate ticks higher. The global recession is causing defaults in mortgages, credit cards and commercial real estate loans — and Citigroup is heavily exposed to all of these.

In early March, Citigroup stock hit an all-time low of 97 cents per share. It has since quadrupled, but remains down 40% for 2009. And at $4.01 a share Thursday, Citigroup stock was down 93% from its late 2006 peak.

Since late 2007, Citigroup has gotten a new CEO, a new chairman, and a new structure that splits its traditional retail and investment banking business from its consumer finance units, asset management, and risky mortgage-related assets. It's also been downsizing by selling off businesses and laying off a fifth of its employees. And it's gotten $45 billion in government funding and a federal backstop on roughly $300 billion in assets.

http://www.usatoday.com/money/companies/earnings/2009-04-17-citi_N.htm