Citigroup earnings up 20% in 3rd quarter

90 cents a share posted on net of $4.69 billion


Citigroup Inc., the world's largest financial-services company, reported yesterday that its third-quarter earnings rose 20 percent, bolstered by improved conditions in the company's retail and investment banking businesses, and a drop in loan-loss reserves.

For the three months that ended Sept. 30, Citigroup, which has $1.2 trillion in assets, reported net income of $4.69 billion, or 90 cents a diluted share, compared with $3.92 billion or 76 cents a share, posted for the third quarter of last year.

The New York-based company's revenues rose 10 percent, to $19.4 billion. Revenue growth was particularly strong in the company's retail banking operations, where revenues rose 17 percent, in its private banking operations, where revenues rose 23 percent, and in life insurance and annuities, which posted a revenue gain of 48 percent.

The improving economy led to a sharp reduction in the amount of money Citigroup needed to set aside to cover loan defaults. In the third quarter, Citigroup set aside $1.61 billion to cover such losses, down 40 percent from the $2.69 billion loan-loss reserve in last year's third quarter. Citigroup's earnings exceeded Wall Street's consensus estimate of 85 cents a share, according to Thomson First Call.

The third quarter was the last period in which Sanford I. Weill was Citigroup's chief executive. On Oct. 1, Weill, 70, was succeeded by Charles O. Prince, a longtime confidant of Weill's who previously ran Citigroup's global corporate and investment bank. Weill remains the company's chairman.

In a statement, Weill noted the strengthening global economy and "the power of our franchise" as reasons for the higher profit.

"It is very clear their earnings model is working," said Robert Albertson, chief strategist at Sandler O'Neill & Partners, a New York investment bank. "The only question is about the loan-loss provision."

Most analysts were not expecting Citigroup's provision for bad loans to decline as sharply as the company reported it did yesterday. Citigroup and other big banking companies were under intense pressure from regulators to increase loan-loss reserves a year ago, Albertson said. That pressure has decreased over the past 12 months.

"It was a big mess a year ago," Albertson said. "Now we have cleaned up the mess, and this is a normal number. Time after time at the end of a cycle, the banks always over-reserve at the end."

Citigroup earned more than any other company in the world last year, generating $15.3 billion of net income.

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