Citigroup Earnings Beat Wall Street Estimates

Citigroup Earnings Beat Wall Street Estimates
Citigroup Earnings Beat Wall Street Estimates

Citigroup (C) on Monday morning reported third quarter net income of $2.2 billion or 7 cents per share, topping Wall Street estimates and marking its third consecutive quarterly operating profit. Last year, Citi reported a loss of $101 million in the third quarter. Citi shares were up as much as 2.3% in premarket trading.

Citigroup's income from continuing operations, which excludes an $800 million pre-tax loss on the previously-announced sale of The Student Loan Corporation, was $2.6 billion, or 8 cents per share, beating expectations of 6 cents per share. In the same period last year, Citi reported a loss of 23 cents per share.

But while year-over-year results improved, net income was down 20% from the second quarter, due mainly to the loss on the sale of SLC and declining revenues from its Securities and Banking division, where income was down 17%. Offsetting these were improvements in its retail banking business, especially in Latin America and North America.

"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 CEO Vikram Pandit, who added that the financial giant is reducing the size of Citi Holdings, its brokerage and asset management arm, "as quickly as economically practical."

Overseas Revenues on the Rise

The banking giant reported third quarter revenues of $20.7 billion, just shy of analyst estimates of $21 billion according to Thomson Reuters. This was down 6% from the second quarter, primarily due to declines in Local Consumer Lending and Securities and Banking. Citicorp Latin America and Asia revenues were up 7% and 1%, respectively, from the prior quarter, while North America and EMEA revenues declined 6% and 2%, respectively.

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Also prominent in Citi's results was the decline in provisions for bad loans to $5.9 billion -- "the lowest level since the second quarter of 2007, reflecting continued improvement in credit quality," Citi said.

Citigroup's total allowance for loan losses was $43.7 billion, or 6.73% of loans, compared to $46.2 billion, or 6.72% of loans, in the second quarter. Citigroup listed $22.4 billion in non-accrual loans, down 10% sequentially from $24.8 billion.

Net credit losses declined for the fifth consecutive quarter to $7.7 billion, reflecting continued improvement across most consumer portfolios, Citi added.

Citi said its Tier 1 Common ratio was 10.3% at the end of the third quarter 2010, up from 9.71% in the prior quarter. Its Tier 1 Capital ratio was 12.5%, down from 11.99% in the second quarter. In addition, it had common equity of $162.6 billion and $43.7 billion of allowance for loan losses.

Citigroup has been busy selling off assets to shore up its balance sheet and repay the U.S. taxpayers the rest of the $45 billion in bailout money it received. At this point, the government still owns 12% of the financial institution.