Citigroup Inc. rose as much as 4.6%, the most in more than 15 months, after the bank posted a surprise increase in first-quarter profit and revenue that beat analysts’ estimates.
Citigroup advanced 3.8% to $47.40 at 1:37 p.m. in New York, after reaching $47.80 earlier today. Net income climbed 3.5% to $3.94 billion, the New York-based company said today in a statement. Profit was $1.30 a share excluding accounting charges and a tax item, surpassing the $1.14 average estimate of 27 analysts surveyed by Bloomberg.
Chief Executive Officer Michael Corbat, 53, has tried to win back investors after two prior quarters missed estimates and the Federal Reserve rejected the bank’s capital plan, contributing to a 12% drop this year through last week for the bank’s shares. Citigroup in the first quarter released $673 million in loan-loss reserves set aside in earlier years, and cut losses at a division holding unwanted assets by about two-thirds.
“Citi’s beleaguered shareholders needed some good news and got it,” Chris Kotowski, an analyst at Oppenheimer & Co., wrote in a note. “The beat came mainly on better revenues, though expenses and better-than-expected loan losses also assisted.”
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Losses in the Citi Holdings unit narrowed to $284 million in the first quarter from $804 million a year earlier, as mortgage results improved. Revenue at the division rose 61% from a year earlier to $1.46 billion.
Total revenue for the quarter fell 1% to $20.1 billion as expenses also declined 1% to $12.1 billion. Analysts predicted revenue of $19.4 billion, according to the average of 19 estimates compiled by Bloomberg.
Corbat was dealt a setback to his turnaround plan last month when Citigroup failed the annual stress test after the Fed found deficiencies in the bank’s ability to project revenue and losses in its global operations. Regulators rejected the firm’s request to quintuple its dividend and repurchase $6.4 billion of shares.
“Despite a quarter that was difficult for our company, we delivered strong results,” Corbat said in the statement.
The bank will focus on preparing for the 2015 stress test rather than requesting additional buybacks or dividend increases this year, Corbat said today on a conference call with analysts.
The stress-test rejection means “it’s hard to imagine” a scenario in which the company can meet its 2015 goal of reaching a 10% return on tangible common equity, Chief Financial Officer John Gerspach said today on a conference call with journalists.
Corbat said his conversations with regulators lead him to conclude they aren’t opposed to the bank’s business model or strategy. The CEO said he expects the board to hold him responsible for the stress-test failure.