Citigroup 2009 Q1 Earnings - by Better Trades

Considered to be one of the most troubled U.S. banks, Citigroup Inc. (C) made it known before the opening bell on Friday that the company posted its smallest quarterly loss since 2007 on decreased write-downs and higher trading results.

For the recent period, Citigroup recorded a net loss of $966M, or $0.18 per share, in sharp contrast to last year's loss of $5.19B, or $1.03 per share. Results were affected by the bank's payment to preferred stockholders, which is tied to the government's past investment in Citigroup. But for the preferred stockholder payments, the company would have posted quarterly earnings of $1.6B.

As for revenues, Citigroup booked twice the amount in which the bank earned last year, due largely to an increase in trading activity in their investment banking business. Overall revenues came in at $24.79B, up more than 99% from last year's 1Q sales of $12.44B.

On average, analysts were looking for the struggling bank to post a quarterly loss in earnings of $0.34 per share on total revenues of $21.94B.

"It was slightly better than anticipated, but we probably underestimated how much government support would be a wind at their back," stated the founder of Holland & Co in New York, Michael Holland. "The challenges are still enormous. In the context of what we heard from JPMorgan yesterday with its continuing concerns about the consumer, Citi is going to suffer too."

Having posted consecutive quarterly losses since the 4Q of 2007, Citigroup has suffered more than $37B worth of losses over the past five quarters, but Friday's announcement comes as positive news for the weakened bank. During that time as well, the company has managed to replace their CEO, while getting a new chairman and restructuring their business operations to divide their retail and investment banking businesses from its consumer finance units, asset management units and mortgage asset units.

Looking within their business segment performance results, the company's revenues from Global Cards slipped 10% to $5.77B, while the Consumer Banking division saw sales slip more than 18% to $6.4B, due mainly to a 42% decline in investment sales as the country continues to hold on tight to any extra cash that they might have.

Institutional Clients Group reversed last year's 1Q negative revenues of $4.96B to a positive sales total of $9.51B, as the securities and banking revenues generated more than $7B in revenues during the recent quarter. Meanwhile, the company's Global Wealth Management division saw its revenues drop more than 20% from last year's results, down from $3.28B to $2.62B.

Citigroup also saw an extensive increase in credit losses during the quarter, jumping more than 75% to costs totaling $10.3B, with the majority of those expenses coming from credit cards. Totals include $7.3B in net credit losses. Since last October, Citigroup has received rescue funds from the government totaling more than $45B from the TARP fund, while also getting the government to share in losses of more than $300B in troubled assets.

In a statement from Vikram Pandit, Chief Executive Officer of Citigroup, "Our results this quarter reflect the strength of Citi's franchise and we are pleased with our performance. With revenues of nearly $25B and net income of $1.6B, we had our best overall quarter since the second quarter of 2007."

The biggest question with Citigroup is whether the bank can find alternative ways to offset their massive loan losses, in which nearly every economist and banker believes will increase more and more throughout the remainder of the year as the unemployment rate continues to steadily increase.

One way of reducing cost has already been set in motion. Since the 4Q, the bank has already shed some 13,000 jobs and plans on reducing their workforce by an additional 50,000 positions. The bank is also in the midst of selling hundreds of billions of dollars worth of non-core assets to help reduce expenses and costs.

In early March, Citigroup's stock plunged to an all-time low of $0.97 per share, although the stock has rebounded substantially since then. However, the stock still remains down more than 40% in2009 and more than 90% off its high of $57 per share in December 2006.

Shares of Citigroup could not benefit from the company's better-than-expected earnings release during the day's trading. Shortly after announcing results, the stock was up nearly 10% in pre-market trading. Unfortunately, Citigroup's stock reversed course by the close of the trading session, giving up 9%, or $0.36, to end the week at $3.65 per share.

Citigroup 2009 Q1 Earnings - by Better Trades