Markets applaud Citigroup profits

Citigroup is the latest US bank to see an improvement in its performance as it has reported its first quarterly net profit in almost two years. ┬á  "We had our best overall quarter since the second quarter of 2007," chief executive Vikram Pandit said.┬á The bank made a profit of $1.6 billion compared to a loss of $5.1 billion a year earlier, and revenues rose 99 percent to $24.8 billion. ┬á However, once dividend payments to preferred shareholders were taken into account, it suffered a near-$1bn loss. ┬á Citigroup made a pre-arranged $2.7 billion dividend payment to preferred shareholders, and a $7.3 billion credit loss from bad loans, but it gained from an accounting rule that allowed the bank to post a one-time gain of $2.5 billion an improvement in trading activity.  The accounting rules allow companies to profit when their own creditworthiness declines. The rules reflect the possibility that a company could buy back its own liabilities at a discount, which under traditional accounting methods would result in a profit.  Citigroup was rescued by a $45 billion taxpayer-funded government bail-out last year.┬á "[This quarter] 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. ┬á Citi's results came hot on the heels of other positive earnings reports from Wells Fargo, Goldman Sachs and JP Morgan. ┬á "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. ┬á Gary Townsend, chief executive officer of Hill-Townsend Capital LLC, adds, ÔÇ£There is a question about sustainability, but itÔÇÖs clearly a good sign for the sector.ÔÇØ