Citigroup 3Q net income falls 23 percent (AP)
31.10.2006 13:43 Finance
But revenue fell short of analysts' expectations because of unexpected weakness in the bank's capital market business.
Citigroup's shares fell 62 cents, or 1.2 percent, at $49.57 in afternoon trading on the New York Stock Exchange.
Net income slipped 23 percent to $5.51 billion, or $1.10 per share, from $7.14 billion, or $1.38 per share, a year earlier. In the third quarter of 2005, New York-based Citigroup sold Travelers Life & Annuity to MetLife Inc. of New York and recorded a $2.12 billion gain on the sale.
Excluding the Travelers Life business and other discontinued operations, Citigroup's earnings from continuing operations totaled $5.3 billion, or $1.06 per share — a 6 percent gain from $4.99 billion, or 97 cents per share, a year earlier.
Quarterly revenue fell slightly to $21.41 billion from $21.5 billion as international revenue growth was offset by a decline in U.S. revenue, reflecting disappointing returns in the bank's capital market businesses, especially in fixed-income trading.
The earnings beat the $1.03 expected by analysts surveyed by Thomson Financial, but revenue was below the analysts' $21.63 billion prediction.
"Our third-quarter results were driven by strength in several businesses, including international revenues, up 11 percent," Chairman and Chief Executive Charles Prince said in a statement.
He added, however, that "results from our capital markets related businesses fell short of my expectations, and I expect improved results from these businesses going forward."
Citigroup, which has been criticized by some analysts and investors for failing to contain expenses, emphasized that operating expenses excluding investment spending "were flat with the prior-year period."
Asked about operating expenses in a conference call with analysts, Prince said that he intended to continue boosting the bank's investment in new branches.
"If we don't invest, we're not going to have revenue growth," Prince said.
He also tried to dispel rumors that Citigroup was looking to buy a major bank in Europe, saying, "Buying a big bank in western Europe is not on my agenda." He also ruled out a major purchase in the United States but added that he would diversify "further into international."
Citigroup recently purchased a major stake in a Turkish bank, Akbank, and Prince described it as "a model for our diversification further and further into international markets."
Mark Hebeka, an equity analyst at Standard & Poor's Equity Research Services, responded to the report by reiterating his "strong buy" recommendation for the stock.
"We are impressed by organic growth efforts, including 785 new branches year-to-date and see much-needed traction," Hebeka said in a report.
Corporate and investment banking revenue slipped about 6 percent to $6.07 billion in the third quarter. Citigroup said its fixed-income markets revenues dropped in part because of "lower results in commodities, interest-rate products and foreign exchange." It said equity markets revenue and investment banking revenue were about even with the year-earlier period.
In consumer banking, revenues grew 9 percent to $5.07 billion overseas compared with a 1 percent advance domestically to $7.8 billion. Citigroup said its international card revenue hit a record and that deposit growth and investment product sales were strong.
Revenue rose 14 percent in the global wealth management division to $2.49 billion, largely because of record revenues at Smith Barney, the bank's brokerage and advisory unit.
Alternative investments tumbled 54 percent to $334 million from $720 million last year.
For the first nine months of the year, Citigroup earned $16.41 billion, or $3.28 a share, down from $17.66 billion, or $3.39 a share, in 2005.
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