Citi quiets critics, profits despite challenging quarter
Beats expectations and basically shocks market
Citigroup (C) recorded a first quarter net income of $3.9 billion, or $1.23 per share, on revenues of $20.1 billion, a slight change from $3.8 billion, or $1.23 per share, on revenues of $20.2 billion for the same period a year ago.
The bank reports a net loss of $284 million compared to loss of $804 million a year ago as improving housing conditions pushed credit losses down by 44%.
Therefore, it seems the bank is not following in the footsteps of its peers. This quarter turned out to be arguably one of the worst for Citi, and the earnings today indicate a triumph of sorts, as expectations underestimated today's results
"Despite a quarter that was difficult for our company, we delivered strong results. Both our consumer and institutional businesses performed well and we grew both loans and deposits while holding the line on our expenses. We reduced our deferred tax assets more than any other quarter since the crisis and drove Citi Holdings closer to break even,” said Michael Corbat, CEO of Citi.
The 5% decline in Citicorp revenues was primarily due to a decline in fixed income markets revenues in Institutional Clients Group and lower U.S. mortgage refinancing activity in North America Global Consumer Banking. However, this was partially offset by higher Citi Holdings revenues.
The lender's net income grew on the heels of its loan loss reserves shrinking.
Citigroup's allowance for loan losses was $18.9 billion at quarter end, or 2.87% of total loans, significantly down from $23.7 billion, or 3.70% of total loans, at the end of the prior year period.
In addition, Citigroup released $673 in loan-loss reserves in the current quarter, down from $650 million in the year prior.
“$4 billion in net income helped generate $6 billion in regulatory capital during the quarter and increased our estimated Tier 1 Common ratio to 10.4% on a Basel III basis. Very cognizant of our shareholders' desire to see a sustainable return of capital, we are engaged with the Fed to better understand their expectations regarding the CCAR process," Corbat added.
It's been a tough quarter for the big bank.
Citigroup just last week announced that it reached an billion-dollar agreement with 18 institutional investors, represented by Gibbs & Bruns, regarding the resolution of certain legacy private-label securitization representation and warranty repurchase claims.
Citigroup will offer to the trustees of 68 Citi-sponsored mortgage securitization trusts to pay $1.125 billion to the trusts, plus certain fees and expenses.
Additionally, Citi recently failed federal stress tests. At the time, Corbat indicated that the stress tests were not a clear indicator of the bank's strengths.
“Needless to say, we are deeply disappointed by the Fed’s decision regarding the additional capital actions we requested. The additional capital actions represented a modest level of capital return and still allowed Citi to exceed the required threshold on a quantitative basis," said Corbat.