Citi surprises market with rise in profits

 
Tim Wallace
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CITIGROUP’S shares soared yesterday as the bank reported a surprise rise in profits for the first quarter of the year.

Profits rose four per cent on the year to $3.9bn (£2.3bn), despite revenues dipping one per cent to $20.1bn.

Much of the gap was made up by cost cutting – operating expenses fell one per cent to $12.1bn – and falling bad loans, where provisions dived 20 per cent to $2bn.

As a result the bank’s shares jumped 4.36 per cent on the day.

However, some areas of performance remained poor, including mortgage lending and its fixed income business.

Mortgage lending plunged in the quarter – loan originations in North America dived 71 per cent on the year to $5.2bn in the first quarter.

And parts of the investment bank also suffered. Revenues in the fixed income markets business slid 18 per cent on the year to $3.85bn.

The bank underwrote fewer bond issues in the quarter, and bond trading is also tougher as confident investors move from fixed income into equities.

The drop firmly outweighed the 13 per cent rise in equities markets revenues to $883m.

The weakness led CEO Michael Corbat to warn it may miss long-term targets.

“It is hard to see a scenario where we meet our target of 10 per cent return on tangible equity in 2015,” he said.

The bank’s headcount fell four per cent on the year to 248,000 and its compensation bill fell five per cent to $6bn.

Its return on average common equity fell from 8.2 per cent to 7.8 per cent, and its Basel III tier one capital ratio improved to 11.1 per cent.

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