Well, it’s not a profit for shareholders but it is a bit better than expections of a loss of 34 cents a share. From Citi’s Q1 release.
Citi Reports First Quarter Revenues of $24.8 Billion
Net Income of $1.6 Billion, Loss Per Share of $0.18
Positive EPS Excluding the $0.24 Impact of Resetting the Conversion Price of Certain Preferred Shares
Net Income Primarily Driven by Improved Performance in Institutional Clients Group and Continued Expense Reductions
NEW YORK–(BUSINESS WIRE)–Citigroup Inc. (NYSE: C) today reported net income for the first quarter of 2009 of $1.6 billion and a loss per share of $0.18, based on 5,385 million shares outstanding. Revenues of $24.8 billion were driven by strong results in the Institutional Clients Group, partially offset by net write-downs. Results also include $7.3 billion in net credit losses and a $2.7 billion net loan loss reserve build.
The $0.18 loss per share reflected the reset in January 2009 of the conversion price of the $12.5 billion convertible preferred stock issued in a private offering in January 2008. This did not have an impact on net income but resulted in a reduction to income available to common shareholders of $1.3 billion or $0.24 per share. Without this reduction, earnings per share were positive. The loss per share also reflected preferred stock dividends, which did not impact net income but reduced income available to common shareholders by $1.3 billion.
Key Items
* Total revenues of $24.8 billion were up 99% compared to the first quarter of 2008, with sequential improvement across all regions.
* Net interest margin of 3.30% increased 50 and 8 basis points versus the first and fourth quarter 2008, respectively.
* Operating expenses were down $3.7 billion, or 23%, since the first quarter 2008.
* Headcount reduced by approximately 13,000 since the fourth quarter 2008 to 309,000 and approximately 65,000 since peak levels.
* Tier 1 capital ratio was approximately 11.8% versus 7.7% in the first quarter 2008.
* Deposit base remained relatively stable at $763 billion compared to the fourth quarter 2008, despite the challenging environment. Deposits declined 8% since the first quarter 2008, due to the sale of the German retail banking operations and the impact of foreign exchange. U.S. deposits increased $8 billion sequentially and $28 billion year-over-year.
* Closed sale of remaining Redecard position for an after-tax gain of $704 million.
Management Comment
“Our results this quarter reflect the strength of Citi’s franchise and we are pleased with our performance. With revenues of nearly $25 billion and net income of $1.6 billion, we had our best overall quarter since the second quarter of 2007,” said Vikram Pandit, Chief Executive Officer of Citi.
“The clear message from this quarter is that our clients remain engaged. Citi is a unique franchise in global financial services. We offer more services in more places around the globe than anyone, which our clients have long recognized. Despite the challenges we have faced this past year, they remain closely engaged with us.
“As strong as our franchise is, we have been taking steps to strengthen it further. We have lowered risk and dramatically reduced the problem legacy assets that have caused many of our losses. We have meaningfully lowered expenses and headcount and improved efficiency. We have also increased our capital base.
“Additionally, we continued to extend significant amounts of credit to U.S. consumers and continued to focus on supporting the U.S. housing market. Since October 2008, we successfully worked with borrowers, with combined mortgages totaling approximately $13.5 billion, to avoid potential foreclosure and were able to keep more than 9 out of 10 distressed borrowers with Citi mortgages we own in their homes. Also since October 2008, our U.S. Cards business has worked with over 820,000 consumers to help them manage their credit card debt through a variety of forbearance programs.
“While we and the industry face challenges in the coming quarters as we work through the weak economy, we will remain focused on strengthening the Citi franchise. We will continue to reduce our legacy risk, aggressively manage expenses and improve efficiency. Most importantly, we will continue to engage our clients with what I believe to be the most talented team of people in financial services today.
“As a final note, I want to personally thank all Citi employees around the world who are the foundation of Citi’s success. Their continued tireless efforts on behalf of our clients underscore their dedication. Despite the challenges of the past year, I remain confident that Citi will emerge from the financial crisis as one of the strongest franchises in financial services,” said Pandit.
Here’s the revenue breakdown:
- Global Cards GAAP revenues declined 10%, mainly due to higher credit losses flowing through the securitization trusts in North America. On a managed basis, Global Cards revenues grew 3% and North America increased 6%. Revenues in the current quarter included a $1.1 billion pre-tax gain on the sale of Redecard shares. The prior-year period included a $439 million gain on Visa shares and a $663 million gain on the sale of Redecard shares.
- Consumer Banking revenues declined 18%, driven by a 42% decline in investment sales, the impact from foreign exchange changes on non-U.S. dollar revenues as they are converted to U.S. dollars for reporting purposes (“impact of foreign exchange”), lower volumes, and spread compression.
- In the Institutional Clients Group, Securities and Banking revenues were $7.2 billion, mainly due to strong trading results, partially offset by net write-downs and losses of $2.2 billion (see detail in Schedule B).
- Transaction Services revenues declined 1% to $2.3 billion, and average deposits and other customer liability balances declined 2%. Growth in both revenues and deposits, driven by double-digit growth in North America and strong growth in EMEA, was more than offset by the impact of foreign exchange.
- Global Wealth Management revenues declined 20%, reflecting the adverse impact of market conditions on capital markets and investment revenues across all regions. The revenue decline was partially offset by higher banking revenues, driven by the bank deposit program.
- Citi adopted FASB’s recent rule changes regarding fair valuation (FAS 157) and other than temporary impairments (FAS 115). The adoption of the changes to FAS 157 had no impact on Citi’s financial results. The adoption of the changes to FAS 115 resulted in approximately $631 million pre-tax of lower impairment charges recorded in revenue in the current quarter. Additionally, the cumulative effect of the changes to FAS 115, which did not impact rev
And a bit more detail on the performance of the investment banking division:
* Securities and Banking revenues were $7.2 billion, driven by positive trading results and lower net write-downs and losses of $2.2 billion (See Schedule B).
* Fixed income markets revenues of $4.7 billion reflected strong trading performance, as high volatility and wider spreads in many products created favorable trading opportunities. Interest rates and currencies and credit products had strong revenue growth. Revenues also included (all reflected in Schedule B):
o A net $2.5 billion positive CVA on derivative positions, excluding monolines, mainly due to the widening of Citi’s CDS spreads
o A net $30 million positive CVA of Citi’s liabilities at fair value option
o A $541 million benefit related to the revenue accretion of non-credit marks on assets that were moved from fair value accounting to accrual accounting in the fourth quarter 2008.
*Revenues were partially offset by the following (all reflected in Schedule B):
o Net write-downs of $2.3 billion on sub-prime related direct exposures. See details in Schedule C.
o Private equity and equity investments losses of $1.2 billion.
o Downward credit value adjustments of $1.1 billion related to exposure to monoline insurers.
o Net write-downs and impairments of $490 million on Alt-A mortgages.
o Write-downs of $186 million on commercial real estate positions.
* Equity markets revenues increased 94% to $1.9 billion, primarily driven by a net $233 million positive CVA on derivative positions, excluding monolines, as well as a net $150 million positive CVA of Citi’s liabilities at fair value option (both reflected in Schedule B). Revenues also reflected strength in derivatives, convertibles and equity trading.
* Lending revenues declined $948 million to negative $364 million, primarily driven by losses on credit default swap hedges. Negative revenues also included $247 million of net write-downs and impairments on highly leveraged finance commitments (reflected in Schedule B).
* Net investment banking revenues were $1.2 billion versus negative $1.7 billion in the prior-year period.
o Advisory revenues were $230 million, down 25%, as a result of lower volumes and continued difficult market conditions.
o Equity underwriting revenues were $194 million, down 15%, reflecting continued low volumes.
o Debt underwriting revenues of $847 million were up significantly, primarily due to the absence of write-downs on highly leveraged finance commitments.
* Expenses decreased 39% and included a $250 million litigation reserve release. The prior-year period included a $202 million write-down of the Old Lane intangible asset and $305 million of repositioning charges. Excluding these items from both periods, expenses declined 25%, driven by lower compensation due to headcount reductions and benefits from re-engineering and expense management.
* Credit costs increased significantly to $1.8 billion. Net credit losses were up $1.4 billion mainly due to LyondellBassell. The $306 million net loan loss reserve build was driven by a $1.2 billion build for specific counterparties and a $506 million build to reflect a general weakening in the corporate credit environment, largely offset by a $1.4 billion release for specific counterparties, mainly LyondellBassell.
Related links:
The IBs of March – FT Alphaville
The return of the IB capital call – FT Alphaville
On Wells Fargo and banks’ well-being – FT Alphaville
Citi’s early cheer put to the test – FT