Citigroup isn't convinced the economy is back.

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Citigroup isn’t convinced the economy is back.

The bank on Monday announced strong first-quarter results, but executives were more cautious than celebratory.

Though they didn’t declare victory, they appeared to have reason to: Citigroup’s investment bank advised more companies on mergers and acquisitions; its retail bank wrote more mortgages; and the company set aside less money for bad loans. Quarterly profit rose 17 percent to $4 billion while revenue climbed 3 percent. The results beat expectations and the bank’s stock price rose.

CEO Mike Corbat said that Europe’s debt problems and slowing growth in parts of Asia can still rattle investors. New regulations, low interest rates and legal and other costs from the financial crisis will weigh on the bank’s earnings.

“I think the world continues to be somewhat of a fragile place,” he said on a call with analysts, “and I expect the markets to remain volatile.”

Chief Financial Officer John Gerspach said the bank doesn’t think consumers are confident enough to drive the economy, whose growth he described as uneven. “We’re still going to be moving somewhat sideways.”

It was a view more pessimistic than that of rivals JPMorgan Chase and Wells Fargo, whose CEOs last week described the economy as improving and consumer sentiment as healthy. Both banks reported record earnings but their revenue slipped, lowering their stock prices.

A split in the banks’ outlooks occurred in the past two quarters as well. Citigroup, for example, hasn’t been as confident as its competitors about a comeback in the housing market.

Monday’s results marked Citi’s first full quarter under Corbat, who took over last fall from Vikram Pandit. Pandit stepped down under pressure from a board that was unhappy with his efforts to turn around the bank. Corbat now has to prove that he can fix Citigroup, the country’s third-largest behind JPMorgan and Bank of America.

So far he’s been cutting jobs and trimming businesses in slow-growth areas, continuing Pandit’s plan to slim down the bank and make it more manageable and less susceptible to special scrutiny from regulators. Bank executives said they were not pulling “any big levers,” but instead moving slowly and steadily to cut costs and wring out more efficiency.

“To use a baseball analogy, a series of singles,” Gerspach said.

The bank spent $148 million on “repositioning costs” in the quarter – a fraction of the more than $1 billion it spent in the fourth quarter, when Corbat took over.

More on Citi’s results:

-Investment banking vs. retail banking: Investment banking revenue jumped 31 percent while revenue from consumer banking was flat. Citi’s investment banking unit advised more companies on mergers and acquisitions and underwrote more stock and bond offerings.

-Mortgages: Citi funded more new mortgages, and, for the first time, it released some of the reserves it had set aside to cover bad home loans in Citi Holdings. That’s the unit where the bank has quarantined troubled assets from the financial crisis – something that investors heralded as the start of a long-awaited trend. Investors, Gerspach noted, are also willing to pay more for investments made of mortgages.

Does this mean, a reporter asked, that “even John Gerspach (is) positive about the housing market?”

“I wouldn’t say that I’m positive about the housing market,” replied the CFO, who for the two previous quarters refused to echo the sentiments of his peers at other big banks when they declared that housing had turned a corner.

Citi has only a fraction of the mortgage market held by Wells Fargo, which is No. 1 in the category. Still, it grew more than its bigger rival.

Citi funded $18 billion in mortgages in North America, up 26 percent for the year. Wells funded $140 billion, enough to keep it far and away in first place, but down 25 percent for the year.

Citi executives said they weren’t looking to significantly grow the mortgage business.

-What else helped results: The bank’s own borrowing costs fell as it retired debt. The drag from Citi Holdings shrank: The unit’s loss narrowed to $789 million from more than $1 billion a year earlier.

The bank continued to free up money it had set aside for bad loans. Total allowance for loan losses was $23.7 billion, or 3.7 percent of total loans, down from $29 billion, or 4.5 percent of total loans, a year earlier.

-Around the world: Revenue climbed 20 percent in North America, but rose only 4 percent in Latin America and 1 percent in Asia. It fell 3 percent in the unit covering Europe, the Middle East and Africa. Gerspach said Asia was “not seeing what I’d consider to be vibrant growth,” particularly in Korea and Taiwan. Europe, he said, is still recovering, and the bank probably wouldn’t look to expand there except to support existing clients with specific services.

-Legal expenses: The bank set aside $710 million for legal expenses in the first quarter, up compared to a year ago but down compared to the fourth quarter. The legal expenses were largely related to Citi Holdings, though bank executives declined to give details.

Unpredictable legal expenses have been an unwelcome vestige of the financial crisis for the banking industry, making earnings difficult to predict. Gerspach said he expected legal expenses to remain “elevated and somewhat volatile.”

“The legal community is very creative,” Gerspach said. “There always is the opportunity for additional litigation even in matters that you might otherwise think would have passed the statute of limitations. I don’t think lawyers have a statute of limitations.”

-By the numbers: Citigroup earned $4 billion, up 17 percent from a year earlier, after stripping out the effects of an accounting charge and other one-time items. That amounted to $1.29 per share, beating the $1.17 expected by Wall Street analysts.

Revenue totaled $20.8 billion, up 3 percent from a year earlier. That also beat the $20.2 billion that analysts had expected.

The stock rose 9 cents to close at $44.87 Monday, even as the overall stock market fell.