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Citigroup, Wachovia Post Record Profits
Friday April 15, 11:25 am ET
By Jonathan Stempel
NEW YORK (Reuters) - Citigroup Inc. (NYSE:C - News) and Wachovia Corp. (NYSE:WB - News), two of the four largest U.S. banks, on Friday reported record quarterly profits, as consumers borrowed more, bad loans declined and costs were kept in check.
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Citigroup, the largest bank, said first-quarter profit increased 3 percent, while Wachovia, the fourth-largest, reported a 30 percent increase. Citigroup also said it may buy back up to an additional $15 billion of stock.
"In a challenging revenue growth environment, banks are focused on holding expenses down," said Mark Batty, an analyst at PNC Advisors in Philadelphia. "Wachovia has clearly done that and Citigroup is taking steps toward that. Credit quality appears to have improved again. That's a good sign, reflecting the economy's improvement."
Another large bank, KeyCorp (NYSE:KEY - News), on Friday also reported higher profit.
In morning trading on the New York Stock Exchange, Citigroup shares rose 2 percent, while Wachovia rose 0.7 percent and KeyCorp surged 4.7 percent. The Philadelphia KBW Bank Index (AMEX:^BKX - News) rose 0.8 percent.
CITIGROUP
New York-based Citigroup said net income rose to $5.44 billion, or $1.04 per share, from $5.27 billion, or $1.01, a year earlier, helped by growth in retail banking, credit cards and international businesses. Profit from continuing operations was $5.17 billion, or 99 cents per share.
Analysts polled by Reuters Estimates on average forecast profit of $1.02 per share. Batty estimated Citigroup earned $1.03 per share after accounting for items.
Revenue rose 6 percent to $21.53 billion, below analysts' forecast for $22.56 billion, but increased twice as fast internationally as in North America excluding Mexico. Operating expenses rose 12 percent to $11.66 billion, but were little changed from the fourth quarter.
"I feel very, very good about the international business as it relates to (the) consumer." said chief executive Charles Prince on a conference call.
The 18-month stock buyback program would allow Citigroup to buy back 6.3 percent of shares outstanding as of Feb. 7, based on Thursday's closing price.
Prince said the program gives Citigroup an appropriate balance between expanding its business and returning capital to shareholders. Last month, the Federal Reserve told the bank to delay big takeovers until it tightens internal controls and addresses a slew of regulatory problems.
Consumer profit rose 9 percent to $2.82 billion on revenue of $12.1 billion. Profit increased 13 percent in retail banking, and 11 percent in credit cards and consumer finance.
"We've seen a consumer who ... is acting very responsibly and very conservatively with their financials," chief financial officer Sallie Krawcheck said.
Corporate and investment banking profit fell 2 percent to $1.68 billion. Citigroup set aside 19 percent less for credit losses.
WACHOVIA
Charlotte, North Carolina-based Wachovia said net income rose to $1.62 billion, or $1.01 per share, from $1.25 billion, or 94 cents, spurred by growth in loans, deposits and debit cards.
Excluding merger and restructuring charges, profit rose to $1.03 per share. On that basis, analysts expected $1.01.
Revenue increased 14 percent to $6.47 billion, and expenses rose 6 percent to $3.87 billion.
Chief executive Ken Thompson said Wachovia is on track and on budget in integrating SouthTrust Corp. The Nov. 1 purchase made Wachovia a dominant bank in several southeastern and eastern U.S. states. Wachovia is separately cutting as many as 4,000 jobs over two years to save $1 billion by 2007.
"Stronger expense discipline has become part of the DNA of this company," Thompson said.
Profit from consumer banking rose 38 percent to $947 million. Corporate and investment banking profit rose 13 percent, capital management profit increased 6 percent and wealth management profit rose 33 percent. It set aside 44 percent less for bad loans.
Cleveland-based KeyCorp., the No. 13 bank, said net income rose to $264 million, or 64 cents per share, from $250 million, or 59 cents, as demand for commercial lending grew and bad loans fell by nearly one-half. Analysts forecast 61 cents. |
