Citi Posts $4.3 Billion Profit after Smith Barney Sale

On the back of the sale of Smith Barney brokerage unit, Citigroup (C: 4.20 -1.41%) posted a $4.3bn Q209 profit, or $0.49 per share.

Citi completed its sale of Smith Barney to Morgan Stanley (MS: 32.10 -0.65%) on June 1, earlier than the original estimated close in Q309. That deal earned the bank $11.1bn pre-tax, $6.7bn after taxes.

Citi’s quarterly profit shows an improvement from a $2.5bn loss in Q208. The banking giant reported total revenue of $30bn in Q209, up $12.4bn from Q208, but that included the one-time sale of Smith Barney.

Citi increased its loan loss reserve to improve its ability to absorb residential mortgage-related and other losses. That, along with higher net credit and other losses brought Citi’s credit costs to $8bn this quarter, up 65% from Q208.

“Our most significant challenge now remains consumer credit,” Citi CEO Vikram Pandit said in a release. “Losses in our consumer businesses have been growing for some time, but we see some positive signs of moderation in those loss trends.”

Consumer lending revenues were $3.9bn, down 37% from Q208. Citi said the higher credit costs and lower loan volumes contributed to that decline.

In its report, Citi said it has since 2007 helped about 625,000 distressed homeowners avoid foreclosure on mortgages totaling more than $67bn.

Citi’s capital position improved, as Tier 1 capital ratio increased to 12.7%, up from 11.9% in Q109 and 8.7% in Q208.

The Morgan Stanley Smith Barney joint venture created a firm with 20,000 financial advisers, $1.7trn in assets, $14.9bn in combined revenues and $2.8bn in combined pre-tax profit. It also signaled the breaking off of Citigroup into two business segments.

The Q209 report is the first time Citi has reported its financial results in the firm’s two operating units — Citicorp, the divisions Citi wants to keep and grow, and Citi Holdings, units set to dissolve or be sold.

On its own, Citicorp made a net income of $3.1bn, down 10% from Q208, while Citi Holdings made a profit of $1.4bn, which included the Smith Barney deal. Without that sale, Citi Holdings would have posted a $5.3bn loss, the same amount Citi Holdings reported losing in Q208.

Write to Austin Kilgore.