Citigroup Posts Strong 1Q Results
By Matt Paolucci

Citigroup Inc. (C), the world's No. 1 financial services firm, reported a 51 percent rise in first-quarter profits to a record, propelled by big gains in its securities business and investment income, coupled with steady growth in its consumer banking division.

New York-based Citigroup, which operates banking, securities and insurance businesses in 100 countries, earned net income of $3.59 billion, or $1.04 per diluted share, in the first quarter. That compared with year-ago net income of $2.36 billion, or 68 cents a diluted share.

Revenues rose 19 percent, outpacing expense growth of 11 percent. Net revenues increased from $17.5 billion from $14.7 billion. Other highlights for the quarter include return on equity of 30 percent, and record earnings for each of Citicorp's major lines of business.

Excluding one-time restructuring charges, Citigroup earned $3.60 billion in the first quarter, or $1.04 a share, up 49 percent from $2.42 billion, or 69 cents a share in the prior year period.

The results handily beat Wall Street estimates of 78 cents a share, according to First Call/Thomson Financial.

Shares of Citigroup (C) closed up $1.25 to $59.25.

"Our very strong first quarter provides tremendous momentum to our fiscal year, with all of our businesses realizing the full advantage from favorable business conditions worldwide," said Sanford I. Weill, Chairman and Co-Chief Executive Officer. "Our results underscore the ability of our businesses to execute in ways that benefit our customers and shareholders."

On Tuesday, Weill, 67, will become the group's sole chief executive, upon the retirement of the group's other Co-Chief executive, John Reed, 61, at the group's annual shareholders meeting.

Weill has also been keen on growing Citigroup through acquisition. "Our acquisition of the investment banking business of Schroders, expected to close in the second quarter, will enhance our ability to benefit from the major structural changes occurring in Europe, and the benefits are already apparent to the clients of both organizations. Our purchase of Reliance's surety business will enable us to expand our insurance presence."

Travelers Property Casualty Corp. (TAP), the No. 6 U.S. property and casualty insurer, also reported a 14 percent rise in first- quarter operating profit on Monday, due to higher investment returns and better-than-expected underwriting results. TAP is 85 percent owned by Citigroup. TAP's first-quarter operating profit rose to 96 cents per share, from 83 cents per share, beating analysts' estimates of 87 cents.

Citigroup's corporate and investment-banking business, which includes the Salomon Smith Barney securities firm, benefited in the quarter by the global merger boom and investors appetite for new stock offerings. The corporate and investment banking business earned $1.84 billion versus $1.36 billion in the year- ago period. Salomon Smith Barney accounted for $957 million of the segment's profit, or 52 percent.

Citigroup booked $634 million in profits from investment activities due to its venture capital business and gains in its other investment portfolios, up from $90 million in the year-ago period. Citigroup's consumer banking operations, which include banking, credit cards and mortgages, earned a record $1.21 billion, up from $981 million a year ago. The segment benefited from growth in its overseas business and the improving credulity of its loans.

The group's insurance units earned $381 million, up 12 percent from $340 million a year ago. The increase in income was driven by higher volume in the sale of annuities and investment gains.

Citigroup seems to be clicking on all cylinders. Of the 25 analysts covering shares of the financial services giant, 22 have either a Strong Buy or Moderate Buy rating on the stock.