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Citigroup Earns Profit as 'Derisked' Bank (Update2)

Citigroup earnings updated with more management commentary, information throughout.

  • Citigroup reported a profit of $3.8 billion or $1.23 per share.
  • Revenues rose to $20.8 billion
  • Analysts expected an EPS of 81 cents per share on revenues of $19.25 billion

NEW YORK ( TheStreet) -- Citigroup (C - Get Report) beat third quarter analyst expectations, reporting a net income jump of 72%, driven by an accounting gain, strong international consumer banking operations and continuing improvements in credit quality.

The bank said net income rose to $3.8 billion or $1.23 per share in the third quarter compared to $2.2 billion or 72 cents per share in the year-ago period. An accounting quirk that enables banks to report a gain from the falling value of their own debt added $1.9 billion to Citi's pre-tax revenues and 39 cents to the earnings per share.

JPMorgan Chase (JPM) which reported last week , also said that debt valuation adjustments or DVA added an accounting gain of $1.9 billion, or 29 cents per share, from the decline in the value of its own debt, which helped offset a $542 million pre-tax loss from its private equity business and an additional $1 billion in pre-tax litigation expenses.
Citigroup CEO Vikram Pandit

Still, Citigroup's report displayed underlying strength. Excluding those accounting gains, Citigroup reported a third-quarter earnings per share of 84 cents, still ahead of analyst expectations of 81 cents per share. Profits were boosted by a $1.4 billion release of reserves, versus $2 billion in the prior year. The bank saw improving credit trends in its cards business and management said during the conference call that it was "very comfortable" with its loan loss reserves.

Revenues came in at $20.8 billion, up slightly from the year-ago quarter. Excluding the one-time gain, revenues were $18.9 billion, 8% below the prior year period and 8% below the second quarter 2011.

Weak trading and investment banking revenues offset strength in international consumer banking businesses. Investment banking fees fell 32% on a sequential basis and 21% on a year-on-year basis to $736 million.

Fixed income, commodities and currency trading, excluding DVA, was $2.3 billion, 33% below the prior year period, driven by significantly lower results in credit products and securitized products. Equity trading revenues, excluding DVA, plunged 73% year-over-year to $289 million hurt by significant declines in derivatives and "principal strategies" revenues, which the bank is in the midst of winding down.
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