Leaner Citigroup beats earnings forecasts

Citigroup has posted first-quarter net income of $4.8bn, up more than a fifth from a year earlier and well ahead of analysts' estimates, suggesting that it is on course to hit the returns targets set out two years ago by chief executive, Mike Corbat.

When he was promoted from the head of Citi Holdings, the "bad bank" of assets deemed non-core after the $50bn government bailout, Mr Corbat said he was aiming to cull enough underperforming units to achieve a group-wide return on assets in the range of 0.9 per cent to 1.1 per cent, and an efficiency ratio in the mid-50s in Citicorp, the core bank, each by 2015.

Citi said on Wednesday that it had achieved an ROA of 1.05 per cent in its first quarter, rising from 0.89 per cent in the fourth quarter, and an efficiency ratio - operating expenses as a percentage of revenues - of 54 per cent in Citicorp.

In a week when JPMorgan Chase, Wells Fargo and Bank of America narrowly beat or missed analysts' estimates for net income, Citi was well clear of the consensus forecast of $4.4bn.

Total Citicorp revenues came to $17.9bn, slipping 2 per cent from a year earlier, thanks largely to a 2 per cent slide in North America and an outsized fall in Latin America.

In a statement, Mr Corbat said the "strong" quarter was testament to Citi's commitment to "building a safer and stronger institution."

Despite the upbeat figures, many investors remain sceptical of the ability of the third-biggest US bank by assets to avoid the kind of trouble that saw it stumble last year in Mexico, pay billions of dollars to settle lawsuits and fail the Federal Reserve's "stress test."

Citi's shares trade at 0.8 times book value - a gauge of the market's expectations for profit growth - well adrift of the big-bank average of 1.16 times.

On the plus side, Citi is now a lot leaner, having exited consumer businesses in 19 countries from Japan to Peru, and recently offloaded the last of the big businesses within Citi Holdings by agreeing to sell OneMain, its consumer finance business, to Springleaf.

It is also carrying a lot more capital to absorb losses in the event of another severe market shock. In 2008, Citi had $1.9tn of assets balanced on just $23bn of core Tier one capital; now it has $1.85tn on $141bn of capital.

This year the Fed waved through Citi's plans to increase its dividend for the first time since the crisis, lifting it from one cent to five.

Its shares rose about 2 per cent in premarket trading to $54.30.

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