By — PBS News Hour PBS News Hour Leave your feedback Share Copy URL https://www.pbs.org/newshour/economy/business-jan-june09-citigroup_04-17 Email Facebook Twitter LinkedIn Pinterest Tumblr Share on Facebook Share on Twitter Citigroup Posts Best Earnings Since 2007 Economy Apr 17, 2009 11:00 AM EDT The announcement marked the company’s first quarterly profit since fall 2007 and offered new evidence that Washington’s massive rescue efforts may be helping banks to revive earnings. Last year, Citigroup posted a loss of $5.11 billion in the same period. In the first three months of this year, Citi’s revenue was up 99 percent to $24.8 billion. But the company’s profits and then some were paid out in special dividend payments to preferred shareholders, leaving a net quarterly loss of 18 cents per share, which was less than the 34 cents a share on revenue of $22.9 billion that had been predicted by analysts, according to Reuters. Citigroup has been the weakest of the large U.S. banks, but CEO Vikram Pandit triggered a stock market rally last month after he said that January and February had been profitable. On Friday, Pandit said in a statement that he was “pleased” with Citigroup’s performance. “While we and the industry face challenges in the coming quarters as we work through the weak economy, we will remain focused on strengthening the Citi franchise,” he said. The bank’s better-than-expected report comes after surprisingly solid earnings from JPMorgan Chase & Co., Goldman Sachs Group Inc., and Wells Fargo & Co. over the past few days. While recent results from these healthier banks have brought some relief to investors, many have been waiting to see how more troubled banks such as Citigroup have fared. At the start of the year, many of the biggest U.S. banks were on life support. Several are showing signs of recovery, aided by a tentative improvement in some corners of the economy and business taken from stumbling rivals. While that could signal that the banking industry might not be as sick as many believed, investors are concerned that the strong trading activity seen by banks in the first quarter was a one-time event as credit markets begin to thaw. Even JPMorgan CEO Jamie Dimon acknowledged Thursday that trading activity is unlikely to remain so robust. “We are in the eye of the storm,” Gerard Cassidy, a banking analyst at RBC Capital Markets told the New York Times. “The worst is behind us for housing. For commercial real estate and corporate lending, there is still a big dark cloud.” The question is whether banks can find other ways to offset loan losses, which nearly all economists and bankers agree will keep rising throughout the year as the unemployment rate ticks higher. The global recession is causing defaults in mortgages, credit cards and commercial real estate loans — and Citigroup is heavily exposed to all of these. In March, Citigroup stock hit an all-time low of 97 cents per share. It has since quadrupled, but remains down 40 percent for 2009 and down 93 percent from its late 2006 peak. Citigroup’s stock rose in premarket trading from its Thursday close of $4.01, but was trading down 3.5 percent Friday morning at $3.87 a share. World stocks were on track for a sixth consecutive week of gains while the dollar gained against major currencies, including the euro, which hit a one-month low. Since late 2007, Citigroup has gotten a new CEO, a new chairman and a new structure that splits its traditional retail and investment banking business from its consumer finance units, asset management, and risky mortgage-related assets. It’s been downsizing by selling off businesses and laying off a fifth of its employees. It has also received $45 billion in government funding and a federal backstop on roughly $300 billion in assets. With results of a new stress test for the nation’s 19 largest banks due to be unveiled on May 4, some banks are jostling to distance themselves from recent dismal earnings reports by trying to free themselves from their government lifelines. Earlier this week, Goldman Sachs raised $5 billion in anticipation of repaying the government’s investment. JPMorgan CEO said Thursday that his company would pay back $25 billion as soon as regulators allowed. “Goldman can give this money back because it has enough money, it can raise money,” Wall Street Journal reporter Deborah Soloman explained on the NewsHour Monday. “You know, they did a $5 billion equity offering today. But without that government capital cushion there, they may not provide the financing, the flow of credit, the things that are going to enable people to get student loans, home loans, credit cards, mortgages, things that basically the government is trying to jump-start with this program.” We're not going anywhere. Stand up for truly independent, trusted news that you can count on! Donate now By — PBS News Hour PBS News Hour
The announcement marked the company’s first quarterly profit since fall 2007 and offered new evidence that Washington’s massive rescue efforts may be helping banks to revive earnings. Last year, Citigroup posted a loss of $5.11 billion in the same period. In the first three months of this year, Citi’s revenue was up 99 percent to $24.8 billion. But the company’s profits and then some were paid out in special dividend payments to preferred shareholders, leaving a net quarterly loss of 18 cents per share, which was less than the 34 cents a share on revenue of $22.9 billion that had been predicted by analysts, according to Reuters. Citigroup has been the weakest of the large U.S. banks, but CEO Vikram Pandit triggered a stock market rally last month after he said that January and February had been profitable. On Friday, Pandit said in a statement that he was “pleased” with Citigroup’s performance. “While we and the industry face challenges in the coming quarters as we work through the weak economy, we will remain focused on strengthening the Citi franchise,” he said. The bank’s better-than-expected report comes after surprisingly solid earnings from JPMorgan Chase & Co., Goldman Sachs Group Inc., and Wells Fargo & Co. over the past few days. While recent results from these healthier banks have brought some relief to investors, many have been waiting to see how more troubled banks such as Citigroup have fared. At the start of the year, many of the biggest U.S. banks were on life support. Several are showing signs of recovery, aided by a tentative improvement in some corners of the economy and business taken from stumbling rivals. While that could signal that the banking industry might not be as sick as many believed, investors are concerned that the strong trading activity seen by banks in the first quarter was a one-time event as credit markets begin to thaw. Even JPMorgan CEO Jamie Dimon acknowledged Thursday that trading activity is unlikely to remain so robust. “We are in the eye of the storm,” Gerard Cassidy, a banking analyst at RBC Capital Markets told the New York Times. “The worst is behind us for housing. For commercial real estate and corporate lending, there is still a big dark cloud.” The question is whether banks can find other ways to offset loan losses, which nearly all economists and bankers agree will keep rising throughout the year as the unemployment rate ticks higher. The global recession is causing defaults in mortgages, credit cards and commercial real estate loans — and Citigroup is heavily exposed to all of these. In March, Citigroup stock hit an all-time low of 97 cents per share. It has since quadrupled, but remains down 40 percent for 2009 and down 93 percent from its late 2006 peak. Citigroup’s stock rose in premarket trading from its Thursday close of $4.01, but was trading down 3.5 percent Friday morning at $3.87 a share. World stocks were on track for a sixth consecutive week of gains while the dollar gained against major currencies, including the euro, which hit a one-month low. Since late 2007, Citigroup has gotten a new CEO, a new chairman and a new structure that splits its traditional retail and investment banking business from its consumer finance units, asset management, and risky mortgage-related assets. It’s been downsizing by selling off businesses and laying off a fifth of its employees. It has also received $45 billion in government funding and a federal backstop on roughly $300 billion in assets. With results of a new stress test for the nation’s 19 largest banks due to be unveiled on May 4, some banks are jostling to distance themselves from recent dismal earnings reports by trying to free themselves from their government lifelines. Earlier this week, Goldman Sachs raised $5 billion in anticipation of repaying the government’s investment. JPMorgan CEO said Thursday that his company would pay back $25 billion as soon as regulators allowed. “Goldman can give this money back because it has enough money, it can raise money,” Wall Street Journal reporter Deborah Soloman explained on the NewsHour Monday. “You know, they did a $5 billion equity offering today. But without that government capital cushion there, they may not provide the financing, the flow of credit, the things that are going to enable people to get student loans, home loans, credit cards, mortgages, things that basically the government is trying to jump-start with this program.” We're not going anywhere. Stand up for truly independent, trusted news that you can count on! Donate now