citigroup, the American bank that was among the worst hit during the financial crisis, reported its best quarterly performance for three years yesterday, beating analysts' predictions and managing to more than double its net income.
The Wall Street giant reported a net income of $4.43bn (£2.9bn), up from $1.59bn, for the first three months of 2010. The numbers signal a remarkable turnaround for the bank, which was forced to borrow $45bn from the US taxpayer through the Tarp scheme at the height of the banking crisis.
"We are proud of our first-quarter results but remain cautious about the environment, given the uncertain economic recovery and high unemployment in the US," said Vikram Pandit, Citi's chief executive. "Realistically, we do not expect our performance to follow an invariable trend line upward. Longer-term, however, the prospects for Citi are clear and bright."
The results also signal an improvement from the fourth quarter of last year, when the bank reported an unexpected loss.
Citigroup was helped by reduced credit-loss provisions during this first quarter, reporting writedowns of $8.6bn – which is $2.4bn lower than the provisions for bad loans made at the end of last year, and the smallest level for more than two years. Revenues slipped slightly, however, coming in at £25.4bn for the first three months of the year, down from £27bn a year earlier.
The banking industry has enjoyed a swift return to strength over the past year, helped by growing confidence in the capital markets. Banks have also made millions of dollars restructuring the balance sheets of companies that over-leveraged in the years leading up to the financial crisis, often by borrowing excessive amounts.
Citi said that its first-quarter numbers had been helped by strong trading performances in bonds and equities. A number of Wall Street institutions, including JPMorgan Chase and Bank of America Merrill Lynch, reported strong investment banking gains last week.
Citi's numbers come in the midst of a busy reporting season for the US banks. Today, all eyes will be on Goldman Sachs, which is expected to report profits of about $4bn. Most attention is likely to be focused on any comments made by that bank after it was charged with fraud by the SEC last week, however. The US investigation is likely to be matched by an inquiry in the UK, after the US watchdog said Goldman had designed a product for one client to bet against the sub-prime mortgage market, while telling others to back the market. On Sunday, Gordon Brown branded the bank "morally bankrupt". Goldman says it has done nothing wrong.
Citigroup's results come a month after the US Treasury said it is aiming to sell its 27 per cent stake in the bank, in an "orderly and measured fashion". The administration pulled out of a plan to off-load the stake last December, after Citi's shares fell.
Mr Pandit said yesterday that the bank owed US taxpayers "a huge debt of gratitude for assisting us at a critical time. We are determined to repay this debt by continuing to build a strong company and contribute to America's economic recovery."
Any successful sale of the US government's stake in Citi is likely to put the British Government under pressure to off-load its 84 per cent stake in Royal Bank of Scotland, and its 41 per cent in Lloyds Banking Group. It spent £45.2bn on saving RBS, at an average cost of 49.9p a share, and £27.6bn on Lloyds, valuing each share at 63.2p.