Citigroup Q1 Profit Climbs Despite Revenue Fall, Cuts Costs

(RTTNews) - Financial services giant Citigroup Inc. (C) Thursday said first-quarter profit increased significantly from the previous year, in spite of a decline in revenues, as the lender tightly managed its expenses. Operating expenses dropped 10 percent owing partly to lower legal and related expenses.

Michael Corbat, CEO, said, "We had a strong quarter overall, particularly in executing against our top strategic priorities. While some businesses faced revenue headwinds, we grew loans and deposits in our core businesses and gained wallet share among our target clients. We tightly managed our expenses, helping to achieve positive operating leverage in Citicorp and we are on track to hit our financial targets for the year."

Net income rose to $4.8 billion or $1.51 per share from $3.9 billion or $1.23 per share reported in the first quarter 2014.

Credit/Debit Valuation Adjustments or CVA/DVA was negative $73 million in the just concluded quarter, compared to $7 million in the prior year period. Prior-year results also included a $210 million tax charge.

Excluding CVA/DVA and the tax item in the prior year period, earnings were $1.52 per share, while it was $1.30 per share last year. On average, 24 analysts polled by Thomson Reuters expected the company to report earnings of $1.39 per share for the quarter. Analysts' estimates typically exclude special items.

The adjusted profit was driven by lower operating expenses and reduced net credit losses, partially offset by lower revenues and a drop in net loan loss reserve release.

Quarterly revenues dropped to $19.74 billion from $20.21 billion last year. Wall Street expected revenues of $19.82 billion for the quarter.

Excluding CVA/DVA, revenues slipped 2 percent to $19.8 billion, driven by a 1 percent decrease in Citicorp revenues and a 7 percent decrease in Citi Holdings revenues.

In Citicorp, revenues dropped 2 percent to $17.90 billion, with a 2 percent drop in Global Consumer Banking and a 1 percent slide in Institutional Clients Group.

For Global Consumer Banking, a 4 percent growth in North America was offset by a 10 percent decline in international revenues.

Within Institutional Clients Group, Investment Banking revenues were 14 percent higher, while Fixed Income Markets saw an 11 percent decrease.

Region-wise, EMEA and Asia showed improvement in revenues for Citicorp, while quarterly revenues declined in North America and Latin America.

In Citi Holdings, revenues dropped 8 percent to $1.83 billion, amid the overall wind-down of the portfolio.

Operating expenses dropped 10 percent to $10.9 billion, supported by efficiency savings and lower legal and related expenses and repositioning costs, as well as the impact of foreign exchange translation. Legal and related expenses fell to $387 million from $945 million.

Cost of credit fell 3 percent to $1.9 billion, reflecting a 20 percent reduction in net credit losses. Allowance for loan losses was $14.6 billion at the end of the quarter, compared to $18.9 billion at the end of the prior-year quarter.

Among peers, Bank of America Corp. (BAC) reported Wednesday a profit for the first quarter compared to a loss last year, reflecting lower loan loss provisions and expenses amid lower mortgage-related litigation expense.

For JPMorgan Chase & Co. (JPM), which announced first-quarter results Tuesday, profit grew 12 percent from last year, despite higher provision for credit losses and expense, reflecting revenue growth and a tax benefit.

C added 1.5 percent in early trade to $54.