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Citigroup Narrows Loss in First Quarter

NEW YORK - Citigroup’s problems are far from over, but Friday it reported its smallest quarterly loss since 2007. The bank posted a first-quarter loss of $966 million after massive loan losses and dividends to preferred stockholders.

However, before paying those dividends, tied to a private stock offering in January 2008, the bank earned $1.6 billion.

Citigroup’s results topped analyst forecasts. The company reported a loss per share of 18 cents, which was narrower than the 34 cents analysts predicted, according to Thomson Reuters. A year ago, Citigroup suffered a loss of more than $5 billion, or $1.03 a share. Shares rose 6 cents, or 1.5 per cent, to $4.07 in morning trading.

Separately, Citigroup said on Friday it is delaying the government’s exchange of billions of dollars worth of preferred shares into common shares until the government completes its “stress test.” The government has been gauging the health of US banks, and the results are expected in early May.

Citigroup’s revenue doubled in the first quarter from a year ago to $24.8 billion thanks to strong trading activity in its investment bank. Its credit costs were high, though — at $10 billion — due to $7.3 billion in loan losses and a $2.7 billion increase in reserves for future loan losses.

Citigroup has been the weakest of the large US banks, posting quarterly losses since the fourth quarter of 2007. But in March, CEO Vikram Pandit triggered a stock market rally after he said that January and February had been profitable for Citigroup.

It was one of the first signals that the banking industry might not be as sick as many believed. Earlier that month, fears that banks would need to be nationalised sent stocks plunging to 
12-year lows.

Citigroup’s better-than-expected report on Friday come after surprisingly solid earnings from JPMorgan Chase & Co., Goldman Sachs Group Inc., and Wells Fargo & Co. over the past 
several days.

While recent results from these healthier banks have brought some relief to investors, many have been waiting to see how more troubled banks such as Citigroup have fared.

Pandit said in a statement on Friday that he was “pleased” with 
Citigroup’s performance.

“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.

One concern among investors is that the strong trading activity seen by banks in the first quarter was a one-time event — the first quarter saw a surge in corporate bond issuance as the credit markets started thawing from their frozen fourth quarter. Even JPMorgan CEO Jamie Dimon acknowledged on Thursday that trading activity is unlikely to remain so robust.

The question is whether banks like Citigroup can find other ways to offset loan losses, which nearly all economists and bankers agree will keep rising throughout the year as the unemployment rate ticks higher. The global recession is causing defaults in mortgages, credit cards and commercial real estate loans — and Citigroup is heavily exposed to all of these.