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Citigroup Earnings Tell a Solid Revenue Story


Looking past confusing non-cash credit and debit valuation adjustments, Citigroup (C) saw its total first-quarter revenue grow 20% from the fourth quarter, and 4% year-over-year.

The shares were up 3% in early trading Monday, to $34.24.

The company's first-quarter profit was $0.95, missing the consensus estimate of a dollar profit, among analysts polled by Thomson Reuters, while revenue of $19.4 billion missed the consensus estimate of $19.81 billion, but a further look at the numbers tells a much better revenue story.


Excluding non-cash credit valuation adjustments (CVA) and debit valuation adjustments (DVA) for all periods, Citigroup's first-quarter revenue was $20.7 billion, increasing from $17.2 billion in the fourth quarter and $20.0 billion during the first quarter of 2011.

CEO Vikram Pandit said that "Global Consumer Banking, our largest business, produced another quarter of good growth in revenues, net income and key drivers like loans and deposits. Transaction Services had record quarterly revenues as it captured increasing share in global trade finance, and Securities and Banking rebounded strongly with year-over-year revenue growth."

Leaving aside Citi Holdings -- which continues to see declining revenue --since it is holds the assets that Citigroup is winding down, main subsidiary Citicorp followed the industry trend, with recovering trading revenues during the first-quarter, following a very difficult fourth quarter.

The Institutional Clients Group saw total fourth-quarter revenue of $8.0 billion, compared to $5.8 billion the previous quarter, and $8.6 billion a year earlier. The group's first-quarter profit totaled $2.2 billion, increasing from $633 million in the fourth quarter, but declining from $2.5 billion in the first quarter of 2011, on lower revenue from principal transactions.

For the Global Consumer Banking division, total first-quarter revenue was $10.0 billion, increasing from $9.9 billion the previous quarter, and $9.6 billion, a year earlier. The division's profit grew 27% sequentially and 14% year-over-year, to $2.2 billion, mainly because credit costs continued to decline.

Retail banking revenue grew 9% sequentially and 15% year over year to $4.5 billion, "largely due to improved results in mortgages," following the industry trend, with President Obama's expanded Home Affordable Refinance Program, or HARP 2, allowing certain mortgage borrowers to refinance their entire loan balances at today's low rates, no matter how much the value of the underlying homes have dropped.

In his comments Monday on JPMorgan Chase's (JPM) earnings results, FBR analyst Paul Miller said that "HARP has not fully ramped up," investors are likely to see a strong second quarter for Citigroup's mortgage operations.

Within the Global Consumer Banking division, Citi's card revenue declined 4% sequentially and 2% year-over-year, to $5.5 billion, as "Citi-branded cards revenues declined 6% to $2.1 billion, and Citi retail services revenues declined 3% to $1.5 billion, both versus the prior year period." The company said the declining card revenue "primarily reflected lower average loan balances," as "Citi-branded cards loans declined 2% and Citi retail services loans declined 5% from first quarter 2011, as well as lower yields in Citi-branded cards."

Citigroup's shares closed at $33.41 Friday, returning 27% year-to-date, following a 44% drop during 2011.

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