Friday July 17, 05:20 PM
Citi posts $4.3 bln profit on one-time gain
NEW YORK (AFP) - Troubled US banking giant Citigroup (NYSE: C - news) said Friday it earned a profit of 4.3 billion dollars in the second quarter, resulting from a big one-time gain on a joint brokerage venture.
Citi's results rebounded from a 2.49-billion-dollar loss in the same period a year ago, but the profit came from a one-time pretax gain of 6.7 billion dollars, or 11.1 billion before taxes, from creating the Morgan Stanley Smith Barney joint brokerage.
The deal closed June 1 put Citi's Smith Barney unit together with the trading division of Wall Street rival Morgan Stanley (NYSE: MS - news) , with Citi getting cash as part of the deal.
Citigroup's total revenues were 30 billion dollars, up a sharp 12.4 billion from the second quarter of 2008, due primarily to the Smith Barney gain.
"For many quarters we have been consistently and successfully executing our plan to build financial strength and return Citi to sustained profitability and growth," said Citi chief executive Vikram Pandit.
"We have made significant progress in recent quarters as evidenced in the significant decline in expenses, headcount, assets, including Citi?s riskiest assets, as well as our 12.7 percent Tier 1 capital ratio."
Citi's results amounted to a profit of 49 cents per share including the one-time gain.
Analysts had been expecting Citi to post a loss excluding one-time gains or losses, but its results excluding the Smith Barney deal were not immediately clear.
In consumer banking, the group posted a profit of 217 million dollars, down 78 percent from a year ago, while its institutional client operations saw profits rise 16 percent to 2.8 billion dollars.
But Citi also posted hefty losses from its real estate and trading operations, as it continued to be battered by the global financial crisis.
The number-three US bank in terms of assets, which needed special help from the government to weather the financial crisis, lost 18.72 billion for all of 2008 before returning to the black with first-quarter earnings of 1.6 billion dollars.
Citi, once the world's biggest financial services firm, has received 45 billion dollars in bailout funds from the government in the form of capital injections.
In June, Citigroup finalized plans to convert its Treasury capital injection into common stock, a move that gives the government a major stake in the ailing banking group.
The US government has a 34 percent stake in Citi under the expanded conversion. Existing shareholders had their stake limited to 24 percent.
The move reorganized Citi's capital without adding new funds, but increases the so-called common equity which is considered more robust by banking regulators.
The government moved to shore up the capital base of Citigroup amid market jitters over the strength of US banks saddled with possibly trillions of dollars of soured home mortgage securities.
The government has persistently rejected rumors that it wanted to nationalize banks although it had already taken effective control of several big enterprises such as insurance giant AIG.
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