NEW YORK – First-quarter profit at Citigroup Inc. (C) dropped 11 percent as the nation's largest financial institution took a charge to cover a massive restructuring designed to cut costs and improve earnings. Still, the results announced Monday beat Wall Street expectations.
The New York-based bank said net income was $5.01 billion, or $1.01 per share, in the January-March period, down from $5.64 billion, or $1.12, a share, a year earlier.
Revenue in the quarter was a record $25.5 billion, up 15 percent from $22.2 billion a year earlier.
Excluding a $1.38 billion charge for restructuring, net income was $5.88 billion, or $1.18 a share.
Analysts surveyed by Thomson Financial had projected earnings of $1.09 in the quarter, excluding charges, on revenue of $24.2 billion.
Citigroup shares advanced 93 cents to $52.53 in early trading on the New York Stock Exchange.
Also Monday, Wachovia Corp. said first-quarter earnings rose 33 percent, helped by growth in lending income and the acquisition of Golden West Financial Corp.
The Charlotte, N.C.-based bank said net income climbed to $2.30 billion, or $1.20 per share, from $1.73 billion, or $1.09 per share, a year ago. Results for the first quarter of 2007 included the bank's $24 billion acquisition of Golden West, which closed in October. Revenue grew to $8.24 billion from $7.1 billion last year.
Excluding merger and restructuring charges, the nation's fourth-largest bank earned $2.31 billion, or $1.20 per share, in the latest quarter.
Analysts estimated earnings of $1.16 per share on revenue of $8.56 billion, according to a poll by Thomson Financial.
In early morning trading, Wachovia shares rose 85 cents to $54.85 on the NYSE.
Chairman and Chief Executive Charles Prince said in a statement accompanying the report that "We achieved these results while completing our structural expense review, which will help us become a leaner, more efficient organization and lower our rate of expense growth."
He said the bank's priorities were "to grow and integrate our businesses, take actions to improve efficiency and lower costs, and continue to build momentum across our franchises."
Prince also said the bank achieved "positive operating leverage," which meant that revenue grew faster than expenses. That would begin to reverse the negative leverage that has prevailed at the bank in recent quarters, prompting investors and analysts to push for expense control.
But David Easthope, a senior analyst at Boston-based Celent, said Citi had to prove it could cut expenses and still grow.
"Citigroup will need to demonstrate over the next few quarters that it can generate more growth across its leaner architecture," Easthope said in a research note. "I am sure management believes this cannot happen soon enough."
Last week, Citigroup announced that it will eliminate about 17,000 jobs, shift 9,500 positions to "lower cost locations" and consolidate some corporate operations. The steps were designed to shave more than $2 billion from the bank's operating costs this year.
Like other U.S. financial institutions, Citigroup has begun taking steps to deal with weakening consumer credit.
"Credit costs increased $1.26 billion, primarily driven by an increase in net credit losses of $509 million and a net charge of $597 million to increase loan loss reserves," the bank said. It said the $597 million charge compared with a net reserve release of $154 million a year earlier.
This included higher losses and reserves in the U.S. consumer division, Citi said, reflecting "an increase in delinquencies in second mortgages and a change in estimate of loan losses inherent in the portfolio."
Revenue in the global consumer group grew 10 percent to $13.1 billion in the first quarter from $12 billion a year earlier, but net income was down because the year-earlier period included a large tax benefit.
Markets and banking showed at 23 percent increase in revenue to $9 billion, while revenue in global wealth management advanced 13 percent to $2.8 billion. Revenue was down in the alternative investments division.
The bank also reported that its assets grew to $2.02 trillion at the end of the first quarter from $1.88 trillion at year's end — the first time they've surpassed the $2 trillion mark.