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Citigroup profits overshadowed by a miss in estimates
Citigroup posted a $1.3bn fourth-quarter profit on Tuesday, as losses on bad loans fell, but the bank missed estimates on its earnings as it struggled with a slump in investment banking revenue.
Citigroup took $45bn in US bailout funds during the financial crisis. Photo: Getty Images
Reuters and agencies 2:11PM GMT 18 Jan 2011
The results pushed Citigroup's annual profits to $10.6bn for 2010, up from a loss of $1.6bn in 2009, and the first time the third-largest US bank has posted a full-year profit since Vikram S. Pandit was named chief executive in 2007.
Citigroup, which took $45bn in US bailout funds during the financial crisis, reported a net profit of 4 cents per share for the fourth quarter. That compared with a year-earlier loss of $7.6 billion, or 33 cents per share.
However, shares tumbled almost 5pc in early US trading, as analysts had expected Citigroup to post a profit of 8 cents per share for the fourth quarter of 2010. The bank said total provisions for credit losses declined $1.1bn, or 18pc, to the lowest level since the second quarter of 2007.
Citigroup was also able to put back more of the money it had set aside for loan losses and unfunded lending commitments, with $2.3bn released this quarter, compared with $2bn in the prior quarter, mainly due to an improvement in the store credit cards business it has put up for sale.
But a slump in Citigroup's securities and trading unit hurt revenues, which fell 6pc on a managed basis from the third quarter to $18.4bn. The bank's fixed-income revenue alone dropped almost 60pc from the third quarter.
"My guess is, Citi wishes they had more loan loss reserves that they could have released to get earnings. Eventually, you need real revenue growth if you're going to get profit growth, you can't just keep releasing reserves," said Matt McCormick, portfolio manager and banking analyst at Bahl & Gaynor.
It was the fourth consecutive quarterly profit for Citigroup, and its first since the US Government finished selling off its stake in the company last month.
Shares of Citigroup had closed at $5.13 on Friday - their highest close since August 2009.
