Citigroup, the U.S. bank rescued by $45 billion in US taxpayer funds, ended a five- quarter losing streak with a $1.6 billion profit on trading gains and an accounting benefit for companies in distress.
Citigroup surged 17 per cent in New York trading. The first-quarter profit compared with a net loss of $5.11 billion, or 34 cents, a year earlier, the New York-based bank said.
On a per-share basis, the bank reported an 18-cent loss because of costs related to preferred dividends.
Citigroup investors hadn’t seen a profit since before chief executive officer Vikram Pandit took over in 2007.
Citi Ireland, is the largest foreign bank employer in the Republic by employee with 2,085 staff in Dublin and Waterford. The majority of its Irish staff work in the IFSC, while 100 are based in Waterford.
While the bank cut compensation costs and took fewer writedowns, it couldn’t halt rising delinquencies on home and credit-card loans. Citigroup benefited from higher fixed-income trading revenue that also bolstered earnings at Goldman Sachs and JPMorgan Chase.
“We’ve seen good trading results from JPMorgan, from Goldman Sachs and now from Citi,” said Gary Townsend, chief executive officer of Hill-Townsend Capital LLC.
“There is a question about sustainability, but it’s clearly a good sign for the sector.”
The stock climbed to $4.52 from $4.01 yesterday on the New York Stock Exchange. At its peak in late 2006, Citigroup stock was worth $56.41, valuing the company at $277 billion.
At the current price, the market value stands at about $22 billion.
The bank reported $4.69 billion of fixed-income trading revenue in the quarter, compared with a trading loss of $7.02 billion a year earlier. Stock-trading revenue was $1.9 billion, a 94 per cent increase.
Citigroup posted a $2.5 billion gain because of an accounting change adopted in 2007. Under the rule, companies are allowed to record any declines in the market value of their own debt as an unrealized gain.
The rule reflects the possibility that a company could buy back its own debt at a discount, which under traditional accounting methods would result in a profit.
Citigroup, one of 19 US banks gearing up for the release of so-called stress tests run by the Federal Reserve, has quadrupled on the New York Stock Exchange since falling to an all-time low of $1.02 on March 5th, in the wake of the company’s announcement that as much as $52.5 billion of preferred stock would be exchanged for common shares to bolster the bank’s equity base.
Bloomberg