Q3 Earnings: Citigroup's Climb 74% on Accounting Gain

Brokerage and asset management units’ revenues total $55 million vs. $8 million loss in Q3 2010

Citing a one-time accounting boost, Citigroup (C) on Monday reported a 74% rise in third-quarter 2011 profits compared with the quarter a year ago. The bank’s $3.8 billion in profits pushed earnings per share to $1.23 versus analysts’ expectations for $0.81.

Citi’s Q3 revenues included a $1.9 billion credit valuation adjustment (CVA) reflecting the widening of Citi’s credit spreads during the third quarter, similar to the $1.9 billion debt-valuation adjustment that JPMorgan reported last Thursday. Excluding CVA, Citi’s revenues totaled $18.9 billion, 8% below the prior-year period and 8% below Q2 2011. CVA increased reported third quarter earnings by $0.39 per share.

Citigroup CEO Vikram PanditChief Executive Vikram Pandit (left) said the bank continues to pare down its brokerage and asset management units, according to Citi's quarterly release.

The brokerage and asset management units’ revenues were $55 million, compared with an $8 million loss in Q3 2010, largely reflecting the absence of markdowns on private equity investments in the prior-year period. The equity contribution from the Morgan Stanley Smith Barney joint venture was essentially unchanged versus a year ago.

“Citi continues to navigate a challenging economic environment and delivered another quarter of solid operating results,” said Pandit in a statement. “We continued to manage our risk prudently while growing the businesses that are core to our strategy. We have reduced the size of Citi Holdings to 15% of our balance sheet and further improved our financial strength.”

Citi Holdings, which includes the brokerage and asset management units, reported assets of $289 billion, 31% lower than a year ago.

“After a careful review of the business, which took into account current trends in credit and technology, we have decided that it makes strategic sense to move retail partner cards and a vast majority of its assets from Citi Holdings into Citicorp. The transition will be completed by the end of this year,” Pandit said.

Citi Holdings revenues of $2.8 billion were 27% below last year’s. The decline was principally due to the continuing reduction in assets, which fell $132 billion, or 31%, from the prior-year period.

“Mr. Pandit has been engaged on an ambitious plan to streamline the sprawling bank and turn it into a leaner, more nimble lender. Only three years ago, Citigroup was in such dire straits that it needed to be bailed out twice by the federal government. And ever since then, Citi has had to play catch-up in investing in its businesses,” wrote Eric Dash in The New York Times’ DealBook blog.

Citibank announced Friday that approximately 80 positions across Citi’s U.S. footprint will be eliminated as part of a “strategic decision” by Citibank and Citigold Wealth Management leadership. The Citi Personal Wealth Management Investment Consultant role will be discontinued, and will no longer be present in the bank’s consumer branches.

For more Q3 news, go to AdvisorOne’s Earnings Calendar for the Finance Sector.

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