Citigroup results beat forecasts

Citigroup has reported its first quarterly net profit in nearly two years, the latest US bank to see an improvement in its performance.

It made a profit of $1.6bn (£1.1bn) compared with a loss of $5.1bn a year earlier. Revenues rose 99% to $24.8bn.

However, once dividend payments to preferred shareholders were taken into account, it suffered a near-$1bn loss.

Shares in Citigroup initially rose, before falling into negative territory, closing 9% lower at $3.65 in New York.

The news, together with better than expected results from conglomerate General Electric, boosted markets as Wall Street's winning streak extended to a sixth week.

Among banks, shares in Bank of America, due to post its quarterly results on Monday, gained 2.5%.

"We had our best overall quarter since the second quarter of 2007," chief executive Vikram Pandit said.

'Tentative hopes'

Citigroup made a pre-arranged $2.7bn dividend payment to preferred shareholders, and said it had made a $7.3bn credit loss from bad loans.

However, it gained from an accounting rule that allowed the bank to post a one-time gain of $2.5bn.

The bank also said it had seen an improvement in trading activity and it had cut costs.

Citi's results came hot on the heels of positive earnings reports from Wells Fargo, Goldman Sachs and JP Morgan.

"Of course the fact that all of these have had such a strong first quarter has led to some tentative hopes that perhaps the banking sector crisis is bottoming," said Richard Hunter, head of UK equities at Hargreaves Lansdown.

Challenges remain

Although Citi reported a profit, its losses in credit cards and consumer loans both increased sharply, the BBC's Karen Nye in New York pointed out.

"Even the strongest banks have admitted to a few weak spots," she added.

Citigroup has received $45bn in government aid from the Troubled Asset Relief Program (Tarp).

The bank has also cut the size of its workforce to 309,000 people from 374,000 at its peak.

"It was slightly better than anticipated, but we probably underestimated how much government support would be a wind at their back," said Michael Holland, founder of Holland & Co.

But Citi's problems are not over yet, he added.

"There's no doubt the challenges are still enormous for Citigroup."