Citigroup profit rises four per cent

NEW YORK - Citigroup today said first-quarter profit rose four per cent, as record revenue from investment banking and international businesses offset weakness in US consumer operations.

Net income at the largest US bank rose to US$5.64 billion ($9.26 billion), or US$1.12 per share, from US$5.44 billion, or US$1.04, a year earlier.

Profit from continuing operations rose nine per cent to US$5.56 billion, or US$1.11 per share. On that basis, profit beat the average analyst forecast of US$1.02 per share, according to Lehman Brothers Inc. analyst Jason Goldberg.

Reuters Estimates said profit, excluding items, totaled US$1.08 per share. Revenue rose five per cent to US$22.18 billion.

"Strength is in the capital markets area and the advisory businesses," said Peter Kovalski, a portfolio manager at Alpine Woods Investments in Purchase, New York. "That should continue for the rest of this year."

Corporate and investment banking profit rose 15 per cent to US$1.93 billion, and revenue rose 21 per cent to US$7.28 billion. Revenue from equity markets surged 67 per cent and investment banking rose 34 per cent, both to records.

The gains helped offset a 4 per cent drop in US consumer banking profit, as rising short-term interest rates cut lending margins. Overall consumer profit rose 8 per cent to US$3.07 billion.

"I'm very, very pleased with our accomplishments and our financial performance," Chief Executive Charles Prince said on a conference call.

"While I don't expect a quick turn" in the US consumer business, "I do expect better results" in the future, he said.

International profit rose 47 per cent and revenue increased 19 per cent, offsetting respective declines of 13 per cent and 1 per cent in the United States.

Wachovia Corp. and SunTrust Banks Inc. on Monday also posted higher quarterly profits.

Citigroup shares rose 30 cents to close at US$48.35 on the New York Stock Exchange. They are little changed in 2006, compared with a 3 per cent gain in the Philadelphia KBW Bank Index .BKX.

New York-based Citigroup won a victory this month when the Federal Reserve in a letter lifted its yearlong ban on big acquisitions, citing the bank's improved internal controls after several regulatory scandals.

Prince said the bank plans to seek out "supplemental ... transactions that extend the franchise."

He also said Citigroup wants to expand US retail banking into new geographic areas, as well as grow in existing ones. "We're going to be doing both," he said.

"It clearly is not going to be just on defending the homeland."

Citigroup opened 298 retail and consumer finance branches and automated teller machines in the quarter, including 36 in the United States. It plans this year to set up more than 5,500 ATMs in 7-Eleven Inc. convenience stores.

US consumer bankruptcy-related losses fell from an fourth quarter level, improving pretax results by US$150 million, Chief Financial Officer Sallie Krawcheck said on the conference call.

Net interest margin fell 0.06 percentage points from the fourth quarter. "It's nice to see that the pressure there is moderating," Krawcheck said.

Profit from alternative investments fell 2 per cent to US$353 million, and wealth management declined 10 per cent to US$287 million. Assets rose 6 per cent to US$1.59 trillion.

Results included a US$520 million after-tax charge to expense stock options, and a US$657 million benefit to resolve a federal tax audit. Citigroup also authorized a buyback of up to US$10 billion of stock.

Prince succeeded Sanford "Sandy" Weill as chief executive in October 2003. Weill will retire as chairman on Tuesday at Citigroup's annual meeting, and Prince will replace him.

- REUTERS