Citigroup profit rises 4 percent in first quarter, beats Wall Street projections

Monday, April 17th 2006, 10:02 am

By: News On 6

NEW YORK (AP) _ Citigroup Inc., the largest U.S. financial institution, on Monday reported its first-quarter profit rose 4 percent, beating Wall Street projections on record investment banking and international revenues.

The company reported a profit of $5.64 billion (euro4.66 billion), or $1.12 (euro.93) per share, for the January-March period, up from $5.44 billion (euro4.5 billion), or $1.04 (euro.86) per share, a year earlier. Earnings from continuing operations rose 13 percent to $1.11 (euro.92) per share _ beating Wall Street projections for a profit of $1.02 (euro.84) per share, according to analysts polled by Thomson Financial.

Driving results from the New York-based financial services powerhouse was record revenue at its securities unit and its international bank, which helped lift revenue from continuing operations to $22.18 billion (euro18.34 billion) from $21.20 billion (euro17.53 billion) a year ago. Revenue from consumer banking overseas and investment banking offset a U.S. slowdown, where rising interest rates dented profit margins in its lending business.

``We had terrific results, yet we're not firing on all cylinders,'' said Chief Executive Charles Prince. ``The one we're not firing on is our consumer business, which we saw good customer interaction and lower credit costs, but we also saw revenue growth was not where we hoped it would be.''

Prince said he was ``not satisfied'' at the performance of Citigroup's consumer business, which includes credit cards, consumer finance and retail banking. Profit from this business rose 8 percent to $3.07 billion (euro2.54 billion) globally, but fell 4 percent in the U.S.

The narrowing gap between short-term borrowing costs and long-term interest rates cut profit margins on loans throughout the banking industry during the period. In addition, new bankruptcy laws that went into effect last year had a negative impact on consumer operations.

Its shares rose 43 cents to $48.48 in morning trading on the New York Stock Exchange.

Citigroup joined other Wall Street institutions in reporting its strongest quarter of merger and acquisition activity since 2000, with record investment banking results.

Corporate and investment banking profit rose 15 percent to $1.93 billion (euro1.6 billion) during the quarter, while the company secured record revenue from its fixed income and equity markets businesses. The bank reported profit declines of 10 percent in wealth management and 2 percent in alternative investments.

Results also included a $520 million (euro429.97 million) after-tax charge for the expense of stock-based compensation, and a $657 million (euro543.24 million) benefit to resolve a federal tax audit for the fiscal years 1999 to 2002.

The quarterly earnings marks the last for Sanford Weill, the Wall Street luminary who hands over the chairman title to Prince on Tuesday. Weill, 73, started a financial services business 17 years ago which he expanded through more than 100 acquisitions _ capped by the 1998 deal in which Travelers Group combined with Citicorp.

The kind of acquisition spree that made a name for Weill on Wall Street is not expected to be a hallmark of Prince's turn leading the company. Prince is not seen making any blockbuster deals, even though the Federal Reserve gave Citigroup permission on April 4 to pursue future acquisitions after a yearlong ban imposed after a string of scandals.

Instead, Prince, 56, has vowed to beef up the company's consumer branches and grow the company organically. He does see room for spot deals, such as last year's move to jettison two underperforming businesses _ insurance and mutual funds.

``I know everyone wants to talk about deals, but the Fed's letter does not in any way change our strategic initiative or our primary focus on organic growth,'' he said. ``We are going to look at deals on a supplemental basis, transactions that extend the franchise where we don't overpay.''