Citi Records Profit

[jwonks]

"The company reported net income of $1.6 billion during the first quarter, up from a loss of $5.1 billion a year ago. Yet, on a per share basis, the company reported a loss of 18 cents a share, reflecting the conversion price of a $12.5 billion preferred share offering from January 2008.
Many on Wall Street were anticipating that the New York City-based bank would report its sixth consecutive quarterly loss. Projections were for Citigroup to report a loss of $1.39 billion, or 34 cents a share."


http://money.cnn.com/2009/04/17/news...ion=2009041706

[flintlock]

Re: Citi Records Profit

If the government would give me billions of dollars, I could probably find a way to post a profit too!

[goadam1]

Re: Citi Records Profit

Part of the profit comes from reporting losses on their own debt as profit (it could be bought cheaper, in theory, and is a potential profit).

[c1ue]

Re: Citi Records Profit

I said passel of lies before, and it was true.

$1.6B income - but then there were twin $1.3B 'one time' expenses associated with a convertible preferred stock price reset and dividends paid to preferred stock holders (i.e. government).

So actually it was a $1B loss.

Then there's the revenue: "Total revenues of $24.8 billion were up 99% compared to the first quarter of 2008, with sequential improvement across all regions. "

But little caveat: again a magical investment bank operational revenue of $7.2B

Other 'highlights':

Global Cards GAAP revenues declined 10%
- this was with a $1B revenue gain from a Latin American credit card unit share sale, Redecard

Consumer Banking revenues declined 18%

In the Institutional Clients Group, Securities and Banking revenues were $7.2 billion, mainly due to strong trading results, partially offset by net write-downs and losses of $2.2 billion (see detail in Schedule B).

Transaction Services revenues declined 1% to $2.3 billion, and average deposits and other customer liability balances declined 2%

Global Wealth Management revenues declined 20%

Doesn't look so strong to me.

As for the Institutional Clients Group: Q1 2007 revenues were $8.9B, Q1 2008 revenues were -4.4B. We're in an environment where M & A activity is almost nonexistent. IPO's almost nonexistent. Yet revenues here are almost at 2007 levels?

Hah!

Even the income statement isn't very impressive: Q1 2008 revenues after having the kitchen sink of losses thrown showed a net income of $1.4B.

Thus the $1.6B indicates the kitchen sink of losses apparently replicated itself.

The 99% increase of revenues to $24.8B also is lower than Q1 2007 revenues of $25.46B

[ax]

Re: Citi Records Profit

Don't forget the $2.5 billion gain from April 1st accounting changes.

[Slimprofits]

Re: Citi Records Profit

Citigroup posted a $2.5 billion gain because of an accounting change adopted in 2007. Under the rule, companies are allowed to record any declines in the market value of their own debt as an unrealized gain.

The rule reflects the possibility that a company could buy back its own debt at a discount, which under traditional accounting methods would result in a profit. Critics say a company in distress is unlikely to realize the gains, and would have to reverse them eventually if it recovers.

Such reversals probably contributed to a first-quarter loss at New York-based Morgan Stanley, the Wall Street Journal reported April 8.

http://www.bloomberg.com/apps/news?p...H40&refer=home

[strittmatter]

Re: Citi Records Profit

Ah,

Fun with numbers. My kids love to play.

[cjppjc]

Re: Citi Records Profit

If the government would give me billions of dollars, I could probably find a way to post a profit too!

Maybe you could, But the way I've been going lately.......

[flintlock]

Re: Citi Records Profit

Maybe you could, But the way I've been going lately.......

Yeah, me too!

[idianov]

Re: Citi Records Profit

Is DOW now following path of Citi? :eek:

citi.gif

dow.gif

[don]

Re: Citi Records Profit

April 18, 2009
After Year of Heavy Losses, Citigroup Finds a Profit

By ERIC DASH
After more than a year of crippling losses and three bailouts from Washington, Citigroup, a troubled giant of American banking, said Friday that it had done something extraordinary: it made money.

But the headline number — a net profit of $1.6 billion for the first quarter — was not quite what it seemed. Behind that figure was some fuzzy math.
Like several other banks that reported surprisingly strong results this week, Citigroup used some creative accounting, all of it legal, to bolster its bottom line at a pivotal moment.

While wisps of recovery are appearing in the nation’s banking industry — mortgage lending and trading income are up industrywide — many banks are doing all they can to make themselves look good.

The timing is crucial. Federal regulators are preparing to disclose the results of stress tests that could determine which banks are strong enough to return the taxpayer dollars that they have accepted, and which might need more. Many banks are eager to extricate themselves from the strings attached to the government bailout money, including restrictions on pay.

Meredith A. Whitney, a prominent research analyst, said in a recent report that what banks were doing amounted to a “great whitewash.” The industry’s goal — and one that some policy makers share — is to create the impression that banks are stabilizing so private investors will invest in them, minimizing the need for additional taxpayer money, she said.

Citigroup posted its first profitable quarter in 18 months, in part because of unusually strong trading results. It also made progress in reducing expenses and improving its capital position.

But the long-struggling company also employed several common accounting tactics — gimmicks, critics call them — to increase its reported earnings.

One of the maneuvers, widely used since the financial crisis erupted last spring, involves the way Citigroup accounted for a decline in the value of its own debt, a move known as a credit value adjustment. The strategy added $2.7 billion to the company’s bottom line during the quarter, a figure that dwarfed Citigroup’s reported net income. Here is how it worked:

Citigroup’s debt has lost value in the bond market because of concerns about the company’s financial health. But under accounting rules, Citigroup was allowed to book a one-time gain approximately equivalent to that decline because, in theory, it could buy back its debt cheaply in the open market. Citigroup did not actually do that, however.

“It’s junk income,” said Jack T. Ciesielski, the publisher of an accounting advisory service. “They are making more money from being a lousy credit than from extending loans to good credits.”

Other banks have taken a similar approach. Bear Stearns, now absorbed into JPMorgan Chase, and Lehman Brothers, which plunged into bankruptcy last autumn, took advantage of credit value adjustments as their bonds lost value last year, as did Goldman Sachs.

JPMorgan, which reported strong results on Thursday, added $638 million to its first-quarter profit by availing itself of this adjustment. Bank of America and other large financial companies are expected to take similar steps when they report their results.

Citigroup also took advantage of beneficial changes in accounting rules related to toxic securities that have not traded in months. The rules took effect last month, after lobbying from the financial services industry.

Previously, banks were required to mark down fully the value of certain “impaired assets” that they planned to hold for a long period, which hurt their quarterly results. Now, they must book only a portion of the loss immediately. (Any additional charges related to the impairment may be booked over time, or when the assets are sold.)

For Citigroup, this difference helped inflate quarterly after-tax profits by $413 million and strengthened its capital levels.

Citigroup and other banks also benefit simply by taking a sunnier view of their prospects. Banks routinely set aside money to cover losses on loans that might run into trouble. By squirreling away less money, banks increase their profits.

That is what Citigroup did.

http://www.nytimes.com/2009/04/18/bu...xDG0sAkM7wvCZA

[jacobdcoates]

Re: Citi Records Profit

ZeroHedge has what seems to be an excellent critique of Citi numbers, done by a smaller ratings agency.
http://zerohedge.blogspot.com/