Accounting gain helps Citi beat profit forecasts

Citigroup announced third-quarter earnings ahead of Wall Street expectations yesterday, though the figures were boosted by an accounting gain as well as growth at its Asian businesses.

The bank's overseas operations helped push net income up to $3.7bn (£2.3bn) from $2.2bn a year earlier. Consumer banking revenues in Asia, where Citi has been investing in its business, rose 14 per cent.

The third-quarter profit includes a pre-tax gain of $1.9bn triggered by the declining value of the bank's debt compared with US Treasuries.

The fall in the price of Citi's debt reflected reduced confidence in Citi's financial position. The bank's shares fell more than a third during the third quarter on fears about turmoil in the eurozone and the US fiscal position.

Falling bad debts also helped the bank's performance, dropping 41 per cent from a year earlier to $4.5bn.

Like JP Morgan, which kicked off the US banks' reporting season last week, Citi's investment banking and trading revenue suffered from market jitters about the eurozone crisis.

Addressing one of the key concerns about US banks, Citi yesterday unveiled exposure of $9.1bn after hedging to seven eurozone countries including Greece, Belgium and France.

The bank's shares rose initially but were down by almost 1 per cent during lunchtime trading in New York.

In the US, the bank has scrapped a plan to dispose of its private-label credit card business, which produces cards for retailers such as Sears, after consumers switched big purchases to their store cards.

Vikram Pandit, chief executive, proclaimed "another quarter of solid operating results" and said he hoped to return capital to shareholders next year. The bank lost a total of $29bn in 2008 and 2009 at the height of the financial crisis.