Citigroup has reported its first quarterly net profit in nearly two years, the latest US bank to see an improvement in its performance. It made a profit of $1.6bn (£1.1bn) compared to a loss of $5.1bn a year earlier. Revenues rose 99% to $24.8bn. However, once dividend payments to preferred shareholders were taken into account, it suffered a near-$1bn loss.
Shares in the banking giant rose 50 cents, or 12.5%, to $4.51 in trading before the market opened. "We had our best overall quarter since the second quarter of 2007," chief executive Vikram Pandit said. Citigroup made a pre-arranged $2.7bn dividend payment to preferred shareholders, and a $7.3bn credit loss from bad loans.
However, it gained from an accounting rule that allowed the bank to post a one-time gain of $2.5bn and an improvement in trading activity. It has also cut costs. Citi's results came hot on the heels of positive earnings reports from Wells Fargo, Goldman Sachs and JP Morgan. "Of course the fact that all of these have had such a strong first quarter has led to some tentative hopes that perhaps the banking sector crisis is bottoming," said Richard Hunter, head of UK equities at Hargreaves Lansdown.
Challenges remain The US Treasury holds a 40% stake in Citigroup, which has received a $45bn government bail-out. Citigroup said it had cut the size of its workforce to 309,000 people from 374,000 at its peak.
"It was slightly better than anticipated, but we probably underestimated how much government support would be a wind at their back," said Michael Holland, founder, Holland & Co. But Citi's problems are not over yet, he added. "There's no doubt the challenges are still enormous for Citigroup."