Citi Misses Topline; EPS Beats

Tyler Durden's picture

Summary of results:

  • Citi Q1 revenue USD 19.7bln vs. Exp. USD 20.54bln; this is a whopping $5.7 billion drop from the $25.4 billion in Q1 2010. So much for revenue growth.
  • Q1 EPS USD 0.10 vs. Exp. USD 0.09
  • Q1 tier 1 capital ratio 13.3%
  • Q1 tier 1 common equity ratio 11.3%
  • Q1 net credit losses declined 25%
  • Q1 Loan Loss Allowance drops to $36.6 billion from $48.7 billion year over year.
  • Total deposits $865.9 billion compared $827.9 billion a year prior
  • And the kicker: Q1 reserve release was $(3.37) billion on $4.2 billion profit from continuing operations. In other words, absent accounting gimmickry the company would barely have been profitable

From the press release:

  • Earnings Per Share of $0.10, Up from $0.04 in The Fourth Quarter 2010
  • Tangible Book Value Per Share1 Up $0.24 Sequentially to $4.69 and Up 15% Over The Prior Year
  • First Quarter 2011 Revenues of $19.7 Billion, Up 7% Sequentially
  • Net Credit Losses Declined 25% from The First Quarter 2010
  • Tier 1 Common of $112 Billion, Tier 1 Common Ratio of 11.3%
  • Citi Holdings Assets of $337 Billion, Down 33% from The First Quarter 2010

New York – Citigroup Inc. today reported first quarter 2011 net
income of $3.0 billion, or $0.10 per diluted share. Net income declined
$1.4 billion from the first quarter 2010, but more than doubled
sequentially.

"After a full year of profitability, we continue to make progress in
2011 by executing our strategy with discipline. Citi Holdings losses
continued to decrease; we are investing in our core businesses in
Citicorp; our capital strength improved; and the mix of revenues
reflects the diversity of our businesses and our depth in both the
emerging and developed markets," said Vikram Pandit, Chief Executive
Officer of Citigroup.

Citigroup revenues in the first quarter 2011 were $19.7 billion, up
7% sequentially, but down 22% from the first quarter 2010. Citicorp
revenues of $16.5 billion were 16% higher sequentially, but 11% lower
than the prior year period. The year over year decline was mainly
driven by lower revenues in Fixed Income Markets and North America Regional Consumer Banking, as well as negative CVA.

Credit continued to improve during the quarter, as Citigroup net
credit losses declined for the seventh consecutive quarter to $6.3
billion. In addition, the current quarter included a net $3.3 billion
release of allowance for loan losses and unfunded lending commitments.

Citi Holdings' assets were $337 billion at the end of the first
quarter 2011, down $166 billion from the first quarter 2010. Citi
Holdings revenues of $3.3 billion were 50% lower than the prior year
period, reflecting the continued decline in assets and the revenue
impact of a $12.7 billion asset transfer from held-to-maturity ("HTM")
to trading.

In the first quarter 2011, Citigroup transferred $12.7 billion of assets in the Special Asset Pool
in Citi Holdings from HTM to trading. This transfer permits the sale
of those assets, which have disproportionately higher risk-weightings
under Basel III. The transfer resulted in a net $709 million pre-tax
charge to revenues, from the recognition of $1.7 billion in pre-tax
losses ($1.0 after-tax) which were previously reflected in accumulated
other comprehensive income (AOCI), partially offset by $946 million of
mark-to-market and realized gains on those assets.

Citi continued to improve its capital strength, with a Tier 1 Common
ratio of 11.3%, book value per share of $5.85 and tangible book value
per share of $4.69, each as of the end of the first quarter 2011.

"As America's global bank, we are focused on supporting the real
economy and creating opportunities for our clients to succeed. Our
sustained profitability has put us in a good position to accomplish our
next goal of responsible growth," concluded Mr. Pandit.

First Quarter 2011 Key Items:

  • Citigroup net income was $3.0 billion, compared to $1.3 billion in the fourth quarter 2010 and $4.4 billion in the first quarter 2010.
  • Citigroup revenues were $19.7 billion, up 7% sequentially.
    • Citicorp revenues of $16.5 billion were up 16% sequentially, driven by a 70% increase in Securities and Banking.
    • Citi Holdings revenues of $3.3 billion declined 17% sequentially, driven primarily by the impact of the asset transfer in Special Asset Pool.
  • Citigroup revenues declined 22% year over year.
    • Citicorp revenues were down 11% from the prior year period, driven by a 25% decline in Securities and Banking, partially offset by 5% growth in Transaction Services.
    • Citi Holdings revenues were down 50% from the prior year period, mainly due to lower overall assets and the impact of the asset transfer in Special Asset Pool.
  • Citigroup expenses of $12.3 billion were down 1%
    sequentially. Expenses increased 7% year over year reflecting higher
    legal and related costs, the impact of foreign exchange2,
    continued investment spending and increased business volumes, partially
    offset by productivity saves and a decline in Citi Holdings.
  • Citigroup provisions for credit losses and for benefits and claims improved by $5.4 billion, or 63%, year over year to $3.2 billion. Consumer net credit losses declined 32% from the prior year period.
  • Citicorp generated 62% of its revenues and 72% of its net income from its international operations in the first quarter 2011.
  • Citicorp end of period loans grew 10% year over year, with 6% growth in consumer loans and 16% growth in corporate loans.
  • International Regional Consumer Banking year over year:
    • Revenues of $4.6 billion, up 8%.
    • Net income of $1.0 billion, up 3%.
    • Net credit margin of $3.9 billion, up 16%.
    • Average deposits of $163 billion, up 13%.
    • Average loans of $126 billion, up 14%.
    • Cards purchase sales of $29 billion, up 20%.
    • Investment sales of $25 billion, up 5%.
  • Citigroup's total allowance for loan losses was $36.6
    billion, or 5.79% of loans, at the end of the first quarter 2011. The
    allowance for loan losses was 247% of non-accrual loans.
  • Citi Holdings assets of $337 billion comprised approximately 17% of total Citigroup assets as of the end of the first quarter 2011.
  • Tangible book value per share was $4.69, up $0.24 sequentially and $0.60 year over year.

CITIGROUP

Citigroup revenues were $19.7 billion, down $5.7 billion
(-22%) from the first quarter 2010. Net interest revenues of $12.2
billion were 16% lower than the prior year period, largely due to
declining loan balances in Local Consumer Lending. Net interest
revenues also included a $245 million pre-tax charge to increase
reserves related to customer refunds in Japan Consumer Finance.
Non-interest revenues were $7.5 billion, down 31% from the prior year
period, principally driven by lower Securities and Banking revenues, negative CVA, and the net charge resulting from the asset transfer in Special Asset Pool.

Citigroup expenses increased $808 million (7%) year over year to
$12.3 billion, reflecting higher legal and related costs, the impact of
foreign exchange, continued investment spending and increased business
volumes, partially offset by a decline in Citi Holdings as well as
productivity saves across the firm.

Citigroup total provisions for credit losses and for benefits and claims of $3.2 billion declined $5.4 billion (-63%) from the prior year period.

  • Net credit losses of $6.3 billion were down $2.1 billion
    (-25%) from the first quarter 2010. Consumer net credit losses declined
    $2.6 billion (-32%) to $5.4 billion, driven by continued improvement in
    credit in North America Citi-branded cards in Citicorp, and Retail
    Partner cards and residential real estate lending in Citi Holdings.
    Corporate net credit losses increased $485 million to $849 million year
    over year, primarily due to higher cost of loan sales as well as losses
    from loans to specific counterparties for which reserves had previously
    been established and were released in the current quarter.
  • The net release of allowance for loan losses and unfunded lending commitments
    was $3.3 billion, compared to $53 million in the first quarter 2010.
    The net reserve release in the current quarter consisted of $2.0 billion
    for consumer loans and $1.4 billion for corporate loans and unfunded
    lending commitments.
    • The net consumer reserve release was mainly driven by Retail
      Partner cards and North America Citi-branded cards. The $2.0 billion
      net reserve release compared to a net build of $224 million in the first
      quarter 2010.
    • The net corporate reserve release reflected releases for the
      overall portfolio, as credit trends continued to improve, as well as
      the release of previously established reserves for specific loans that
      offset charge-offs taken in the current quarter. The $1.4 billion net
      reserve release compared to a net release of $277 million in the first
      quarter 2010.

The effective tax rate on continuing operations was 28%.

Citigroup's total allowance for loan losses was $36.6 billion
at quarter-end, or 5.79% of total loans, down from $48.7 billion, or
6.80%, in the prior year period. The improvement reflected asset sales,
lower non-accrual loans, and overall improvement in credit quality in
Citigroup's loan portfolio.

  • The consumer allowance for loan losses was $32.7 billion at
    quarter-end, down $8.7 billion from the prior year period. The
    allowance for consumer loan losses was 7.47% of total consumer loans,
    compared to 7.84% in the first quarter 2010.

Citigroup's non-accrual loans of $14.8 billion declined 48%
from the prior year. A significant portion of the reduction was due to
the recapitalization of Maltby Acquisitions Limited, the holding company
that controls EMI Group Ltd., during the first quarter 2011. The
allowance for loan losses was 247% of non-accrual loans.
Citigroup end of period assets were $1.95 trillion, down 3% year over year. Citigroup end of period deposits were $866 billion, up 5% year over year, driven by a 28% increase in non-interest bearing deposits. Citigroup's net interest margin
was 2.91%, down from 3.34% in the first quarter 2010, reflecting a
decline in loan balances and yields, and a higher reserve build related
to Japan Consumer Finance.

Citigroup's Tier 1 Capital ratio was 13.3% at quarter-end, while its Tier 1 Common ratio was 11.3%.

Citi Financial Supplement