April 16, 2012

Citi Reports Record Revenue Led by International Transactions

Citigroup earns $0.95 per share in Q1

Citigroup CEO Vikram Pandit. (Photo: AP) Citigroup CEO Vikram Pandit. (Photo: AP)

NEW YORK (AP) — Citigroup, which has 4,600 branches in 40 countries, boasts that it is the most global American bank. That reach paid off big time in the first three months of the year.

Citigroup pulled in record revenue from processing transactions for its international corporate clients, and its loans to customers in Asia and Latin America grew.

The bank said Monday that it made $2.9 billion in the first three months of the year, or 95 cents per share, which includes a $1.3 billion accounting charge that Citi took because the value of its debt increased.

Without that charge, its earnings per share would be $1.11, which beat estimates of $1.01 among analysts surveyed by FactSet, a provider of financial data.

Citi stock rose almost 2% after the results came out.

AdvisorOne Earnings Season 2012In the first three months of the year, interest rates fell and the value of most corporate debt rose. Because it would cost it more to buy back its own debt on the open market, Citi had to take a charge under accounting rules.

Citigroup's revenue in the quarter was $19.4 billion, down 2%from the year-ago quarter.

The bank's international transaction services had quarterly revenue of $2.7 billion, up 7%. The international reach came in especially handy at a time when rival banks in Europe have stepped back from such transactions.

European banks are struggling because they own large amounts of sovereign debt issued by European countries. Debt from Spain and Italy has fallen in value as those countries struggle to make debt payments.

Citi's trade finance was strong because "European competitors struggled," noted Guy Moszkowski, a bank analyst at the brokerage division of Bank of America Merrill Lynch.

More of Citi's customers in emerging-market countries also took out loans. Revenues grew 6% in Latin America to $2.4 billion and 5% in Asia to $2.

However, Citigroup's customers—both consumers and corporations—saved faster than they were spending. Citi's total deposits grew 5 percent to $906 billion.

John Gerspach, chief financial officer of Citigroup, said that roughly 26% of the bank's balance sheet was now in cash or similar investments rather than earning income from loans.

"We would love to put our cash to work in loans, but we just don't see that level of demand at this point of time," Gerspach said in a conference call with reporters after releasing results.

As more of its customers paid back loans on time, the bank took a profit of $1.2 billion from the reserves it had set aside for loan losses. Customer loans late by at least 90 days, including credit card payments, fell 19% from a year ago.

Just like at rival JPMorgan Chase, Citi's investment banking revenue fell, declining 12% to $5.3 billion. Volume in the stock market has been light this year. Citi's equity markets revenue fell 18%.

Historically low interest rates attracted Citi's large corporate clients to raise issue more debt. Citi's debt underwriting revenue increased 19% to $601 million.

Citi's first quarter results continued a stream of profits in the past two years, which gave CEO Vikram Pandit enough confidence to promise shareholders a higher dividend.

However, in a setback, the Federal Reserve said Citi, unlike most of its peers, did not have enough capital to raise its stock dividend and still withstand a financial crisis worse than 2008.

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Read full coverage of AdvisorOne's Q1 2012 earnings season.

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