Citi profit rises 30 percent as investment banking grows
By David Henry and Tanya Agrawal
(Reuters) - Citigroup Inc (C.N: Quote) said on Monday its first-quarter profit jumped 30 percent, a stronger-than-expected increase, as the No. 3 U.S. bank generated more money from underwriting stock issues and advising companies on mergers.
Citigroup shares closed 0.2 percent higher after the results, which provided more evidence that a long-awaited turnaround might be under way at the bank six months after its board pushed out Vikram Pandit as chief executive and handed the reins to Michael Corbat.
Investors were encouraged by signs the bank was keeping a lid on expenses while bolstering revenue and reducing losses on bad assets. The bank's shares have risen more than 80 percent since last June, in part because of the improving economy and partly because of its own efforts to get its house in order.
"Citigroup has been so messed up for so many years, there's an opportunity for them," said Mark Mandell, portfolio manager at Dalton Investments in Santa Monica, California, which owns Citigroup shares.
"All they have to do is a get a little better and they can get back to a valuation closer to their competitors."
Citigroup's shares trade at a discount to their tangible book value, an accounting measure of their net worth, even as those of many competitors trade at a premium.
(For a graphic on Citigroup earnings, click on link.reuters.com/fuf47t)
The bank's biggest gains came from its investment bank, particularly in North America. Citigroup hired bankers about two years ago and those investments in staff paid off in the first quarter, said John Gerspach, chief financial officer, on a conference call with reporters. Continued...