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Citi's Pandit Keeps Optimism in Check

Citigroup CEO Vikram Pandit is being careful not to bask in the glow of the company's blowout first quarter for very long.



) --


(C) - Get Citigroup Inc. Report

blew past Wall Street expectations by posting a

surprise profit

for the first three months of the year, but CEO Vikram Pandit was careful not to bask in the glow for long.

Citigroup CEO Vikram Pandit

Citigroup's whopping profit of $4.4 billion was driven by improved revenue, especially from fixed income trading, as well as lower credit costs and tighter expense controls. The topline number of $25.4 billion was a solid 22% ahead of Wall Street's consensus view, and earnings per share of 15 cents left the average analysts' estimate for a breakeven result in the dust. So Pandit is presumably breathing a sigh of relief, having met the challenge of strong results at

JPMorgan Chase

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Bank of America

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, right? Not exactly.

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"We are proud of our first quarter results but remain cautious about the environment, given the uncertain economic recovery and high unemployment in the U.S.," he said, before adding this cautionary comment: "Realistically, we do not expect our performance to follow an invariable trend-line upward."

By going this route, Pandit seems is taking a page from the book of JPMorgan CEO Jamie Dimon, who over the years has become notorious for keeping a lid on Wall Street expectations, then producing surprise numbers to the upside.

Pandit's comments should likely be framed against the rally in Citigroup shares since March. He's managed to deliver on the promise of the stock's 40% run-up year-to-date, and has to be feeling at least a little bit bulletproof, even with the new uncertainty being brought to bear on the financial sector by the

Securities and Exchange Commission's

civil fraud charges against

Goldman Sachs

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What's ironic is that Pandit's pessimism comes at a time when Dimon's tone has taken a noticeable turn for the better. In the conference call for JPMorgan's results last week, Dimon offered some of his most positive commentary about future performance and the state of the economy since the financial crisis began.


While the economy still faces challenges, there have been clear and broad-based improvements in underlying trends," Dimon said. "We believe these improvements will continue and are hopeful they will gather momentum, resulting in a strong recovery. Regardless of the economic trends, our company continues to invest for the future, building a better franchise for our clients and customers."

As far as the stock has come, Pandit still has quite a task in front of him. He's got to grow earnings while continuing to pare down the balance sheet. Add in regulatory risk that could take a bite out of future revenue and questions about the pace of economic recovery, and it's no wonder Pandit wanted to rein in expectations a bit.

"Citi was a bit less optimistic in print than BAC and JPM were last week, but this likely reflects a bit more conservatism than anything else," Deutsche Bank equity analyst Matt O'Connor wrote following the results.

If Pandit's strategy is to let Wall Street take over cheerleading duties, it worked with O'Connor, who went on to say that, based on the first-quarter performance, the company is "the only bank that's over earning estimated normal EPS."

If Citigroup can just keep up with the pace it set in first quarter, not necessarily grow the bottomline from here, the company will be ahead of the game. Citigroup shares are up again Monday, adding more than 6%, so investors don't seem put off by Pandit's caution. After all, it's always better to under-promise and over-deliver than the other way around.

--Written by Laurie Kulikowski in New York