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Citigroup net income jumps $4.45 billion in 1st quarter

Rises from $350 million in 4Q14 to $4.8 billion in 1Q15

Citigroup (C) reported net income for the first quarter 2015 of $4.8 billion, or $1.51 per diluted share, on revenues of $19.7 billion. This compared to net income of $3.9 billion, or $1.23 per diluted share, on revenues of $20.2 billion for the first quarter 2014.

The results of the first quarter were a dramatic reversal from 2014’s fourth quarter when Citigroup reported a net income of $350 million, or $0.06 per diluted share, on revenues of $17.8 billion.

The fourth quarter of 2014 was significantly down from a net income of $2.5 billion, or $0.77 per diluted share, on revenues of $17.8 billion for the fourth quarter 2013.

Legal and related expenses and repositioning charges totaled $3.5 billion in the fourth quarter, compared to $1.0 billion in the prior year, which severely dented earnings, Citigroup said.

But without those issues in the first quarter, Citigroup returned to a strong position.

"We had a strong quarter overall, particularly in executing against our top strategic priorities,” Citigroup Chief Executive Officer Michael Corbat said.

“While some businesses faced revenue headwinds, we grew loans and deposits in our core businesses and gained wallet share among our target clients,” Corbat continued. “We tightly managed our expenses, helping to achieve positive operating leverage in Citicorp and we are on track to hit our financial targets for the year.”

Citigroup's loans were $621 billion as of quarter end, down 7% from the prior year period, and down 3% on a constant dollar basis. In constant dollars, 2% growth in Citicorp loans was offset by continued declines in Citi Holdings, driven primarily by reductions in the North America mortgage portfolio and the reclassification of $10 billion of loans to other assets related to the previously-announced pending agreements to sell OneMain Financial and Citi's credit card operations in Japan.

Citigroup revenues were $19.7 billion in the first quarter 2015, down 2% from the prior year period. Excluding credit valuation adjustments/debt valuation adjustments, revenues of $19.8 billion decreased 2% from the prior year period, driven by a 1% decrease in Citicorp revenues and a 7% decrease in Citi Holdings revenues, Citigroup said. Excluding CVA/DVA and the impact of foreign exchange translation, Citigroup revenues increased 1% from the prior year period, as 2% growth in Citicorp revenues was partially offset by the decrease in Citi Holdings.

Citigroup's net income increased 21% to $4.8 billion in the first quarter 2015 from $3.9 billion in the prior year period. Excluding CVA/DVA in both periods and the tax item in the prior year period, net income of $4.8 billion increased 16% from the prior year period, primarily driven by lower operating expenses and lower net credit losses, partially offset by lower revenues and a reduced net loan loss reserve release.

Citigroup's operating expenses were $10.9 billion in the first quarter 2015, 10% lower than the $12.1 billion in the prior year period, driven by ongoing efficiency savings and lower legal and related expenses and repositioning costs, as well as the impact of foreign exchange translation, partially offset by higher regulatory and compliance costs and volume-related expenses.

Citigroup's allowance for loan losses was $14.6 billion at quarter end, or 2.38% of total loans, compared to $18.9 billion, or 2.87% of total loans, at the end of the prior year period. The $239 million net release of loan loss reserves in the current quarter compared to a $673 million net release in the prior year period. Citigroup asset quality continued to improve as total non-accrual assets fell to $7.0 billion, a 22% reduction compared to the first quarter 2014. Corporate non-accrual loans declined 28% to $1.2 billion, while consumer non-accrual loans declined 20% to $5.6 billion.

"Citi Holdings was profitable again and we announced the sale of OneMain, the largest business remaining in Holdings. We utilized $1.2 billion of deferred tax assets, helping increase our Common Equity Tier 1 Capital ratio to 11.0% and our Supplementary Leverage Ratio to 6.4%,” Corbat said.

"We were pleased that the Federal Reserve did not object to our capital plan so we can now begin meaningful capital return to our shareholders,” he added. “We remain committed to building a safer and stronger institution and we will continue to make the necessary investments to ensure we have a sustainable capital planning process.”

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