CITIGROUP bucked gloomy economic trends to post a surprise jump in profits yesterday.
The boost came mostly from a drop in losses from bad loans, which fell by 41 per cent to $4.5bn (£2.86bn) in an unexpectedly bullish sign from US consumers.
Chief executive Vikram Pandit declared the results “solid” in a “challenging economic environment” and said he was scrapping plans to offload the bank’s credit card arm after it did far better than expected.
The business had been placed in Citi Holdings, the group’s run-off portfolio, but will now be transferred back into the fold of core assets, after bringing in $2.2bn in profits year-to-date.
The bank said that the division had gained from consumers’ other credit avenues drying up, driving them towards using Citi credit cards more.
Like JP Morgan Chase, which reported results last week, Citi gained $1.9bn in pre-tax profit from an accounting technicality, but even stripping out the effect, its earnings rose.
Pre-tax profit rose 10.4 per cent versus the same period last year, reaching $3.39bn for the group on the back of smaller losses from Citi Holdings assets.
Losses at the non-core division dropped by 25 per cent versus last year to $1.24bn.
However, revenues were flat – or down eight per cent if the accounting gain is removed – and overall profitability was dragged down by its investment bank.
Top-line income at the investment bank shrank 12 per cent, with equities revenues plummeting by 73 per cent to $289m and fixed income shrinking revenues down by a third to $2.71bn.
The numbers will make grim reading for front-office bankers, who are already facing the prospect of lay-offs in their thousands.
Shares in Citi closed down 1.65 per cent at $27.93 in the US yesterday.
Meanwhile, Wells Fargo, the US retail bank, reported quarterly profits of $8bn yesterday, which was a slight improvement on the previous quarter.