Citigroup profit rises 30% as investment banking grows

Citigroup reported a higher-than-expected 30% rise in first-quarter profit yesterday as revenue from its securities and investment banking business swelled.

The No 3 US bank said yesterday that net income rose to $3.8bn, or $1.23 per share, in the period — the first full quarter under chief executive Michael Corbat — from $2.9bn, or 95¢ per share, a year earlier.

Under Corbat Citigroup partly recovered from its embarrassing failure last year under former CEO Vikram Pandit to win approval from the Federal Reserve after a stress test for its plan to distribute capital.

The company scored higher capital levels on a new test and received approval in March for its cautious application to spend $1.2bn on stock buybacks. Citigroup has not asked to raise its quarterly dividend from its nominal level of 1¢ per share.

Excluding certain accounting adjustments, net income rose to $4.0bn, or $1.29 per share, in the latest quarter, from $3.4bn, or $1.11 per share, a year earlier.

Analysts on average had forecast earnings of $1.17 per share before the certain accounting adjustments.

Total revenue rose 6% to $20.5bn. Expenses fell 10% to $12.4bn from the fourth quarter.

The bank said its net interest margin for the first quarter was 2.94%, up marginally from 2.93% in the fourth quarter.

Citigroup, which is reviewing some of its weaker operations around the world, said revenue from its securities trading and investment banking business rose 31% to $6.98bn.

The results were also lifted by the release of $652mn in loss reserves, of which $351mn was from the Citi Holdings portfolio that is largely composed of mortgage assets. These assets are tied to US house prices, which have been rising.

Under Corbat, who took over October, Citigroup took a more cautious approach on loan loss reserves in the fourth quarter, releasing just $86mn.

The profit contributed to an increase in Citigroup’s Basel III Tier 1 common equity ratio, a key regulatory measure of capital, to 9.3% at the end of March from 8.7% three months earlier, the company said.

Citigroup’s adjusted results exclude the impact of changes in value of debt and obligations of its trading partners.

Citigroup shares rose 13.2% this year through Friday. In the same period, the KBW Bank stock index rose 9.6% and Standard & Poor’s 500 stock index rose 11.4%.

Bashneft

Middle-sized Russian oil company Bashneft said yesterday net profit increased in 2012 by 4.5%, year-on-year, to 52.1bn roubles ($1.68bn) on the back of rising production and exports.

But net income in the fourth quarter fell 38% to 10.76bn roubles from the previous three months, below some analysts’ forecasts, due to higher export fees and transportation tariffs.

The fourth quarter showed the impact of Russia’s so-called “60-66” export duty regime introduced in 2011, which cut export duties on crude oil but increased them on low-grade oil products.

The company, owned by oil-to-telecoms holding company Sistema, has been adversely affected by the export duty regime due to its large exposure to refined products.

Bashneft’s Moscow-traded shares fell 2.6% in early trade, underperforming a 1.33% decline in the broader market. Later its shares pared losses and were almost flat as of 0905 GMT, while the main Moscow stock index fell further, by 1.8%.

Bashneft said that revenues increased 9.5% last year to 532.5bn roubles, while earnings before interest, tax, depreciation and amortisation (EBITDA) rose 5.2% to 98.7bn roubles.

Bashneft also said that it’s oil production rose by 1.9% to a record-high of 15.437mn tonnes (307,900 barrels per day) in 2012.

It said it aims to maintain this level of production for years to come.

Charles Schwab

Charles Schwab Corp’s first-quarter earnings rose 6% but fell short of analysts’ expectations as client trading activity remained lukewarm and one-time expenses increased.

The San Francisco-based retail brokerage giant said yesterday that net income climbed to $206mn, or 15¢ a share, from $195mn, or 6¢ a share, a year earlier. Analysts’ average forecast was 16¢ a share, according to Thomson Reuters I/B/E/S.

Revenue rose 8% $1.29bn, just above analysts’ forecast of $1.27bn.