Citigroup profit surges

Citigroup Inc., the bank 12 percent- owned by U.S. taxpayers, said profit surged, beating analysts' estimates as the company reduced loan-loss reserves by $1.99 billion. Third-quarter net income was $2.17 billion, or 7 cents a share, compared with profit of $101 million, or a loss of 27 cents after preferred dividends, in the same period a year earlier, the New York-based bank said today. Ten analysts surveyed by Bloomberg estimated per-share earnings of 5 cents at the bank, the third-biggest in the U.S. by assets. The results bring Chief Executive Officer Vikram Pandit, 53, one quarter closer to achieving his first annual profit after losses in 2008 and 2009 that totaled $29.3 billion. The reserve reduction showed how Citigroup benefited as fewer consumers fell behind on loan payments. Losses from bad loans declined to $7.66 billion from $11 billion. “This is primarily a credit improvement story, virtually across the board, as well as the ongoing disposition of non-core businesses,” said Gary Townsend, CEO of Hill-Townsend Capital LLC in Chevy Chase, Maryland. “We've seen both of those continue through the third quarter and we expect it to continue through the fourth.” Citigroup rose to $4.04 in New York trading at 8:34 a.m., from $3.95 on Oct. 15. The shares have climbed 19 percent this year. ‘Continued Profitability' “We have put in place all the elements for continued profitability,” Pandit said in the statement. Revenue fell 10 percent to $20.7 billion, while expenses declined 2.6 percent to $11.5 billion. JPMorgan Chase & Co., the second-biggest U.S. bank, reported net income of $4.42 billion on Oct. 13 as provisions for loan losses fell $5.8 billion. Charlotte, North Carolina- based Bank of America Corp. reports results tomorrow. The company, the largest U.S. bank, will probably report net income of about $1.37 billion, the Bloomberg survey shows. Citigroup's trading and investment-banking unit posted net income of $1.38 billion, compared with $829 million in the same period last year. The bank slipped to fourth place among underwriters of U.S. bonds during the quarter, down from No. 1 a year earlier, according to data compiled by Bloomberg. The bank underwrote $7.85 billion of global equity offerings to make it the fifth-largest in the industry, compared with seventh last year, the data show. Citi Holdings Citi Holdings, the division created to hold businesses tagged for disposal, reported loan losses of $4.64 billion, down from $7.37 billion a year earlier. Pandit reduced assets in Citi Holdings to $421 billion from $556 billion a year earlier. Pandit said in September that he expects total assets in Citi Holdings to fall below 20 percent of the bank's balance sheet by the end of 2010. Citi Holdings accounted for $1.54 billion of the overall reserve release. The company took a $435 million loss on the sale of Student Loan Corp., a Citi Holdings business, during the quarter. That was less than the $500 million the company previously estimated. David Hilder, an analyst with Susquehanna Financial Group LLLP, warned investors in a September note that Citi Holdings assets may be sold below their book value. “The risk, of course, is that market conditions really dry up, we get that double-dip, and they're unable to sell those assets or they have to do so at distressed prices,” said William Fitzpatrick, a financial analyst with Optique Capital Management, which has $750 million under management. “That for me remains the wild card for Citigroup.” Taxpayers' Stake The U.S. Treasury Department reduced its stake in Citigroup to 12 percent during the quarter, booking a $1 billion profit for U.S. taxpayers who provided a $45 billion bailout to the bank in 2008. The Treasury, headed by Timothy F. Geithner, sold $2.2 billion of Citigroup trust-preferred securities this month. “I always keep hearing about a bailout,” said Alex Lieblong of Key Colony Management LLC, which holds 5.3 million Citigroup shares. “It was a pretty good bailout for the government.” Citigroup's employees totaled 258,000 at end of the third quarter, down 1,000 from the end of June and down 7,000 from the end of December 2009. The better than expected third quarter earnings from Citigroup Inc. this morning helped European stock markets push higher and tempered expected losses on the Wall Street open. In Europe, the FTSE 100 index of leading British shares was up 21.01 points, or 0.4 percent, at 5,724.36 while Germany's DAX rose 25.93 points, or 0.4 percent, at 6,518.23. The CAC-40 in France was 3.62 points, or 0.1 percent, higher at 3,830.99. Wall Street was also poised to open lower later, but by much less than earlier predicted -- Dow futures were down 25 points, or 0.2 percent, at 10,999 while the broader Standard & Poor's 500 futures fell 3.1 points, or 0.3 percent, to 1,171.80. The improvement came as Citigroup said net income available to common shareholders totaled $2.15 billion, or 7 cents per share. That compares to a loss of $3.24 billion, or 27 cents per share, during the same quarter last year. Analysts had predicted Citigroup would earn 6 cents per share. There's a lot of scheduled news to occupy investors this week, including a raft of U.S. corporate earnings statements from all types of U.S. businesses, including Apple, Coca-Cola, Harley Davidson, McDonald's and Xerox. Aside from the corporate newsflow, investors will continue to monitor the economic data in the context of what the Fed is planning to do to prop up the ailing U.S. economy. --Bloomberg