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Citi CEO Pandit Warns Of Macro Uncertainty As Q1 Profit Slips

Citi CEO Pandit Warns Of Macro Uncertainty As Q1 Profit Slips
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4/16/2012 9:50 AM ET

Financial services giant Citigroup Inc. (C: Quote) on Monday reported a decline in profit for the first quarter, weighed down by hefty accounting costs. Ascertaining that the bank continues to be one of the best capitalized banks, CEO Vikram Pandit said there is still much macro uncertainty.

Tightening of credit spreads negatively impacted the results, with the bank making credit/debit valuation adjustment of $1.3 billion in the quarter, which was $1 billion more than last year.

The substantial increase caused first-quarter net income decline to $2.93 billion or $0.95 per share from last year's $3.0 billion. The results also included a net gain of $477 million from minority investments.

Excluding these adjustments and gains, earnings were $1.11 per share, the company noted. On average, 22 analysts polled by Thomson Reuters expected earnings of $1.00 per share for the first quarter. Analysts' estimates typically exclude one-time items.

Total revenues slipped to $19.41 billion from last year's $19.73 billion. Analysts estimated revenues of $19.81 billion for the quarter. Revenues improved 13 percent sequentially.

Securities and Banking division saw its revenues drop 12 percent due to the impact of the valuation adjustments as well as higher credit costs, but the business increased revenue by 65 percent from the previous quarter.

At Citi Holdings, revenue declined 47 percent, driven by negative revenues in the Special Asset Pool and Brokerage and Asset Management and lower revenues in Local Consumer Lending. The revenues also reflected the decline in assets in Citi Holdings.

Total allowance for loan losses was $29.0 billion at the end of the quarter, or 4.5 percent of total loans, compared to $36.6 billion, or 5.8 percent, in the prior-year period.

Last month, results of bank stress tests released by the U.S. Federal Reserve showed that Citi, among a few other lenders, fell short by at least one measure of the Fed's four regulatory minimum levels under a hypothetical stress scenario.

Citigroup, which has been under pressure from banking regulators to bolster its capital reserves, last month sold its 2.71 percent equity stake in Shanghai Pudong Development Bank to institutional investors for an after-tax gain of about $349 million.

Pandit said, "We continued to wind down our Citi Holdings legacy portfolio, which now stands at 11% of our total assets, while further building capital. With a Tier 1 Common Ratio of 12.4% under Basel I and an estimated Tier 1 Common Ratio of 7.2% under Basel III, we continue to be one of the best capitalized banks in the world."

Pandit added that there is still much macro uncertainty and the company will continue to manage risk carefully.

Citi's bigger rival JP Morgan Chase & Co. (JPM: Quote) on Friday reported a marginal drop in first-quarter profit, amid solid performance by its retail division and sharply lower bad loan provisions.

C is currently trading at $34.43, up $1.02 or 3.05 percent, on a volume of 6.8 million shares.

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by RTT Staff Writer

For comments and feedback: editorial@rttnews.com

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