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World biggest bank citigroup profits from outside US Original Source Link: (May no longer be active)
http://www.bloomberg.com/apps/news?pid=20601087&sid=a_83p0F.eygs&refer=homehttp://www.bloomberg.com/apps/news?pid=20601087&sid=a_83p0F.eygs&refer=home
Citigroup Profit Rises, Led by Gains Outside the U.S. (Update7)
By Joseph N. DiStefano
July 20 (Bloomberg) -- Citigroup Inc., the world's biggest bank, said second-quarter earnings increased 18 percent, topping analysts' estimates, on record revenue from Asian and European markets.
Net income climbed for the first time in four quarters, to $6.23 billion, or $1.24 a share, from $5.26 billion, or $1.05, a year earlier, New York-based Citigroup said in a statement today. Profit exceeded the highest estimate of analysts surveyed by Bloomberg.
International revenue rose 34 percent after Chief Executive Officer Charles Prince spent more than $10 billion in the past year on at least 10 acquisitions, including stakes in Akbank TAS in Turkey and China's Guangdong Development Bank, to get into countries that are growing faster than the U.S. Bank of America Corp., which relies on the U.S. for almost 90 percent of revenue, yesterday said profit advanced 5.2 percent.
``It looks impressive across the board,'' said Mark Batty, an analyst at Philadelphia-based PNC Wealth Management, which oversees $75 billion and owns Citigroup shares. ``The international business produced tremendous revenue growth and net income growth.''
Revenue from non-U.S. businesses surged to $12.6 billion from $9.38 billion, and net income from those markets jumped 35 percent to $3.04 billion. Citigroup does business in more than 100 countries, offering services from credit cards and consumer banking to merger advice and stock underwriting.
Revenue, Expenses
Total revenue climbed 20 percent to $26.6 billion, compared with a 16 percent increase in expenses, the company said. Prince announced plans in April to cut 17,000 jobs as part of an initiative to reduce annual costs by $4.6 billion, or almost 10 percent, by 2009.
Revenue growth outpaced expenses for a second straight quarter, which may help ease concern among shareholders who complained earlier this year that Prince was spending too much on new branches and acquisitions.
``This looks like a better quarter than we've had in a long time,'' said Michael Jones, chief executive officer of Clover Capital Management in Rochester, New York, who earlier this year advocated breaking up Citigroup because its share price was underperforming the bank's competitors. ``They look like they're going to get through the mortgage problems with no trouble because they're diversified.''
Shares of the company fell 40 cents, or 0.8 percent, to $50.73 at 4 p.m. in composite trading on the New York Stock Exchange, compared with a 1.5 percent drop for the 24-member KBW Bank Index.
Return on Equity
Return on equity, a gauge of how effectively the company reinvests earnings, was 20.1 percent compared with 18.6 percent a year earlier.
Citigroup's investment bank earned $2.83 billion in the second quarter, up from $1.72 billion. The bank ranks as the No. 2 merger adviser this year after perennial frontrunner Goldman Sachs Group Inc., having participated in 273 announced deals valued at almost $850 billion since the start of January, according to data compiled by Bloomberg. Citigroup is the top arranger of U.S. bond sales.
Profit from consumer banking fell 15 percent to $2.7 billion, as credit costs increased by $934 million. Bank of America, the second-biggest U.S. bank by assets after Citigroup, yesterday said it set aside $1.81 billion in the quarter to pay for future credit losses, up from $1.01 billion a year earlier.
No Bottom Yet
``Credit will continue to deteriorate,'' Citigroup Chief Financial Officer Gary Crittenden said in an interview. ``We will likely continue to take reserves in that area. I don't think we have yet seen the bottom.''
Crittenden said Citigroup had made commitments on four large leveraged loan sales that hadn't found buyers at the original terms as of June 30, and that there would be others during the third quarter.
``They had terms and pricing that was not appropriate,'' Crittenden said. ``They're in the process of being redone.'' Leveraged financing represents 5 percent of Citigroup's Securities and Banking division revenue, he said.
Wachovia Corp., the fourth-biggest U.S. bank, said today second-quarter earnings rose 24 percent as its purchase of Golden West Financial Corp. boosted profit from mortgages. The company, based in Charlotte, North Carolina, said its total provision for credit losses rose to $179 million from $59 million a year earlier. Loans it couldn't collect almost tripled.
JPMorgan Credit Losses
U.S. banks' borrowing costs have climbed following 17 Federal Reserve interest-rate increases from June 2004 to June 2006. JPMorgan Chase & Co., the third-biggest U.S. bank, said earlier this week that its so-called managed provision for credit losses doubled to $2.12 billion from $1.05 billion a year earlier.
The slump in the U.S. housing market is the worst in more than a decade. The share of late payments by subprime borrowers, or those at the greatest risk of default, reached the highest level since 2002 in the first quarter, the Mortgage Bankers Association reported.
Citigroup has reduced its exposure to the subprime secured lending market to $13 billion in assets as of June 30 from more than $20 billion on March 31, Crittenden said on a conference call with analysts.
The bank's Global Wealth Management unit, which includes the Smith Barney brokerage, earned $514 million, up 48 percent from the second quarter of 2006. Smith Barney's revenue set a record, which the company said partly reflected the acquisition of a majority stake in Japan's Nikko Cordial Corp.
Alternative investments, which include hedge funds and private-equity holdings, earned $456 million, a 77 percent jump.
Last Updated: July 20, 2007 16:12 EDT
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