Pandit’s Citi takes surprise swing to net profit

April 18th, 2009 - 10:34 am ICT by IANS  

By Arun Kumar
Washington, April 18 (IANS) Ailing banking giant Citigroup, led by Indian American chief executive Vikram Pandit, has surprised Wall Street to deliver its first profit in more than a year, helped by strength within its investment banking division.

Taking something of a break from the financial crisis with strong results reflecting a rebound in capital markets, the bank swung to $1.6 billion first quarter profit from a $5.1 billion loss a year earlier and a $17.5 billion loss in the fourth quarter.

Yet, after taking into account the conversion price of a $12.5 billion preferred share offering from January 2008 and $1.22 billion in preferred stock dividend payments to the US government among others, Citigroup Friday reported a loss of $966 million or 18 cents a share.

Even after including those special items, Citigroup still fared better than many on Wall Street were anticipating. Analysts were forecasting a loss of $1.39 billion or 34 cents a share.

“We are pleased with our performance,” CEO Pandit said, a noteworthy statement in light of dismal results for the previous five consecutive quarters, but his remarks were tempered by a cautious outlook.

“While we and the industry face challenges in the coming quarters as we work through the weak economy, we will remain focused on strengthening the Citi franchise,” he said in a statement.

The company’s results overall were its best since the second quarter of 2007, reflecting lower risk, fewer problem assets, tighter cost controls and more efficient operations, Pandit said.

On the business side, Citi’s clients “remain closely engaged with us”, he added.

Since the credit markets began to unravel in late 2007, the company has posted net losses of more than $28 billion. That led the government to take a $45 billion stake in Citigroup in the form of preferred shares and warrants to help stabilise the bank.

Much of the bank’s profit was driven by big numbers in its institutional clients group, which houses its investment banking and trading businesses.

Newly installed chief financial officer Ned Kelly warned that credit costs would remain a “headwind” through the remainder of the year, particularly in its consumer-related loan portfolios.

“The thing we are bracing ourselves for is what is going to happen to the economy and the consumer,” Kelly told investors during a conference call Friday morning.

Kelly maintained that the company was continuing to make progress on its

dramatic reorganization announced earlier this year, which effectively split the company into two divisions.

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