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Citigroup Profit Climbs as Bank Reduces Bad Assets

NEW YORK (TheStreet) -- Citigroup (C) posted an unexpected gain in first-quarter profit before the bell Monday, sending shares higher in premarket trading.

Shares of the bank were up 3.5% to $47.26 before the bell.

Adjusted net income rose to $4.15 billion, a 3.8% year-over-year increase, and per-share earnings of $1.30 were a penny higher than a year earlier. Book value per share climbed 6% to $66.25, while its Basel III Tier 1 Common Ratio of 10.4% was up from 9.3% a year earlier.

Excluding CVA/DVA adjustments, revenue slipped 2% from a year earlier to $20.1 billion.

Analysts' estimates averaged by Thomson Reuters pointed to net income of $1.14 a share on revenue of $19.37 billion.

Lower revenue was as expected given how the industry as a whole has suffered more conservative fixed-income trading and soft mortgage lending.

The third-largest U.S. bank said fixed-income markets revenue declined 18% year over year to $3.9 billion. JPMorgan  (JPM), the largest U.S. bank by asset portfolio, recently reported a 26% year-over-year decline in its fixed-income segment.

"Despite a quarter that was difficult for our company, we delivered strong results," said Citigroup CEO Michael Corbat in a statement. "Both our consumer and institutional businesses performed well and we grew both loans and deposits while holding the line on our expenses."

Contributing to the better-than-expected quarter, New York-based Citigroup narrowed its adjusted net loss from Citi Holdings to $292 million from $798 million in the year-ago quarter. Citi Holdings consists of the bank's troubled assets, residual segments from the financial crisis and aren't considered part of the bank's core business.

"We reduced our deferred tax assets more than any other quarter since the crisis and drove Citi Holdings closer to break even," added Corbat.

The company also said it would work closely with the Federal Reserve to better understand the Comprehensive Capital Analysis and Review (CCAR), an annual vetting process of the industry to ensure too-big-to-fail banks are able to weather economic stress.  Citigroup was one of five banks which had its capital return plans rejected by the Fed.

Citigroup had planned to buy back $6.4 million worth of common stock and boost its quarterly dividend to 5 cents a share. Its proposed buybacks were more than fivefold the size of 2013's approved repurchase program.

In its earnings release, Corbat added that the bank is "very cognizant of our shareholders desire to see a sustainable return of capital, we are engaged with the Fed to better understand their expectations regarding the CCAR process. We are committed to bringing our capital planning process to the highest possible standards."

-- Written by Keris Alison Lahiff in New York

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