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Citigroup Profits Down 32 Percent

Citigroup Inc. released its first-quarter results Tuesday, posting a 32 percent decline in profits thanks to sagging loan business and poor trading results which lowered the bank's revenue even as its expenses increased.  The results illustrate how the nation's third-largest bank, while it has stabilized since narrowly avoiding collapse at the height of the recession, is still struggling to generate real growth.

The results were better than analysts had projected, which helped to support Citi's stock even as the broader market was sinking.  But as with the other big banks, Citi's profit came mainly from releasing loan loss reserves it had set aside.  The three largest U.S. banks, Citi, Bank of America, and JPMorgan Chase, have all posted shrinking loan portfolios for the first three months of the year, raising serious concerns over the strength of U.S economic growth.

The factor helping banks out the most right now is that credit losses are gradually declining.  Citi's credit losses, for example, fell 25 percent in the first quarter after a steady downward trend throughout 2010.  Citigroup is among the most international of the major U.S banks, which helped out a number of businesses in its Citicorp unit, where it holds operations it plans on continuing to operate over the long term.

Citigroup posted earnings for the three months ended March 31st of $3.0 billion, or 10 cents a share, just beating out the consensus estimate of 9 cents a share forecast by economists in a recent Thomson Reuters survey.  In the first quarter of 2010, the bank earned $4.4 billion, or 15 cent a share.  The bank's revenue, meanwhile, dropped 22 percent, fueled by a 29 percent decline in its fixed income trading revenue.

Citi's slumping revenue was a reflection of a volatile quarter for markets, driven by continued political unrest in North Africa and the Middle East, as well as the ongoing nuclear crisis in Japan.  That market volatility is also expected to hinder profitability at top US investment banking firms Morgan Stanley and Goldman Sachs, both of who release quarterly results this week.