Citigroup Inc., the third-biggest U.S. bank, said profit rose 74 percent, beating analysts’ estimates as a $1.9 billion accounting gain reduced the impact of declining trading and investment-banking revenue.
Net income for the third quarter was $3.77 billion, or $1.23 a share, compared with $2.17 billion, or 72 cents, in the same period a year earlier, the New York-based bank said today in a statement. The average estimate of 25 analysts surveyed by Bloomberg was 82 cents. Excluding the accounting benefit, earnings per share were 84 cents.
Citigroup’s credit-valuation adjustment, or CVA, mirrored a similar $1.9 billion gain posted by JPMorgan Chase & Co. (JPM) last week. The benefit helped Citigroup Chief Executive Officer Vikram Pandit, 54, weather a quarter in which its shares tumbled 38 percent amid concern revenue from trading and investment- banking would drop because of Europe’s debt crisis and the U.S. debt-ceiling fight. Excluding the accounting adjustment, revenue dropped 8 percent.
“When an investor looks at the results, they should look at the core operations,” said David Knutson, a credit analyst with Legal & General Investment Management in Chicago. “The CVA will offset the operating weaknesses primarily in investment banking.”
Citigroup said last month it would limit hiring to only “critical” jobs as Pandit, whose strategy is to expand in emerging markets, tries to control costs. Pandit is also trying to boost revenue as new regulations on minimum capital levels take effect.
“Citi continues to navigate a challenging economic environment and delivered another quarter of solid operating results,” Pandit said in the statement. “We continue to manage our risk prudently while growing the businesses that are core to our strategy.”
JPMorgan Chase, the second-biggest U.S. bank at midyear, reported net income of $4.26 billion last week including the accounting benefit. Bank of America Corp. (BAC), the biggest U.S. bank, may report a profit of $2.73 billion tomorrow, according to a Bloomberg survey of analysts.
Citigroup posted its seventh profitable quarter in a row after losing a total of $29.3 billion for 2008 and 2009. Shares of the company were down 40 percent this year through last week. The KBW Bank Index (BKX), which tracks the performance of 24 U.S. banks, fell 27 percent.
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