Citigroups’s Q3 Profit At $2.2 Billion
According to BBC and Yahoo Finance, stocks advanced on Monday, led by gains in financial companies as Citigroup reported stronger-than-expected profits and concerns about lenders’ home foreclosure problems eased. Citigroup Inc. shares jumped 4.1 percent to $4.11, helping other bank shares, while the S&P 500 financial index gained 1.6 percent. The index was down 2.4 percent last week amid worries that bank profits could be hurt by a broad probe by authorities into foreclosure practices.
Citigroup reported its third consecutive quarterly profits. Last week, JPMorgan Chase and Composted results that also beat expectations. Citigroup Inc. (branded Citi) is a major American financial services company based in New York City. Citigroup was formed from one of the world’s largest mergers in history by combining the banking giant Citicorp and financial conglomerate Travelers Group on April 7, 1998. Citigroup Inc. has the world’s largest financial services network, spanning 140 countries with approximately 16,000 offices worldwide. The company employs approximately 260,000 staff around the world, and holds over 200 million customer accounts in more than 140 countries. It is a primary dealer in US Treasury securities.
Citigroup suffered huge losses during the global financial crisis of 2008 and was rescued in November 2008 in a massive bailout by the U.S. government. Its largest shareholders include funds from the Middle East and Singapore. On February 27, 2009, Citigroup announced that the United States government would take a 36% equity stake in the company by converting $25 billion in emergency aid into common shares; the stake was reduced to 27% after Citigroup sold $21 billion of common shares and equity in the largest single share sale in US history, surpassing Bank of America’s $19 billion share sale one month prior.
Citigroup is one of the Big Four banks in the United States, along with Bank of America, JP Morgan Chase and Wells Fargo. Citigroup’s results, boosted by slowing credit losses and reduced reserves for bad loans, helped to offset concern about the foreclosure crisis.
“The financials last week were getting hammered over questions over foreclosure proceedings … now it doesn’t seem to be as all-encompassing,” said Marc Pado, U.S. market strategist at Cantor Fitzgerald & Co in San Francisco.
Corporate results suggest “the banks are slowly getting better, getting repaired. And I think that’s been the game plan all along,” he said. The Dow Jones industrial average was up 56.80 points, or 0.51 percent, at 11,119.58. The Standard & Poor’s 500 Index was up 4.05 points, or 0.34 percent, at 1,180.24. The Nasdaq Composite Index was up 1.45 points, or 0.06 percent, at 2,470.22.
Citi’s bad loan provisions of $5.9bn, against $6.7bn in the previous three months, were the lowest since the second quarter of 2007, according to the bank’s results. Losses from bad loans fell by 30% versus a year earlier to $7.7bn, as the level of defaults in Citi‘s credit card and property operations fell. Citi’s results echo those of fellow US bank JP Morgan, which also reported stronger-than-expected quarterly profits on Friday, also thanks in large part to falling loan loss reserves. Bank of America, the country’s biggest bank, is also due to report its results on Tuesday.
“Achieving our third straight quarter of positive operating earnings is continued evidence that we are successfully executing our strategy and we believe we have put in place all the elements for continued profitability,” said Citi‘s chief executive, Vikram Pandit. The profit figures were ahead of most analysts’ forecasts, and mark a third straight quarter of rising profits. Citi’s shares opened 3.1% up, sparking a jump in the stock prices of rival banks. Share prices among big US banks fell heavily last week amid fresh concerns about firms’ exposure to the troubled US housing market.
“Financials have tried to weather the storm from the last couple of days, today helped by Citigroup,” said Steve Goldman, strategist at US-based broker Weeden & Co. However Matt McCormick, fund manager at Bahl & Gaynor Investment, said he was concerned about Citi’s fall in revenues. “It’s a problem for all the banks now. They have trouble raising revenues,” he said. “Reducing loan loss reserves is not something you can do indefinitely. Eventually, they’ll get to the point where they’ll say, ‘we can’t keep going down this path’.” The bank also continued to scale down the overall size of its lending business, with total loans falling 5.5% during the quarter.11