Citigroup enlivens market with ‘best’ performance

WASHINGTON (AFP): Troubled banking giant Citigroup had its best profit performance in over a year in the first two months of 2009, company CEO Vikram Pandit told employees in an internal memo made public yesterday. 

“We were profitable through the first two months of 2009 and are having our best quarter-to-date performance since the third quarter of 2007,” Pandit wrote to the company’s global staff of more than 300,000, according to a copy of the memo published in the Financial Times.

After five consecutive quarters of multi-billion dollar losses on huge credit-related writedowns, Citigroup generated over $19bn in revenue in January and February despite the economic turmoil and an uncertain future.

Pandit attributed the profits to “a partial thawing of credit markets” and congratulated the bank’s staff for “a very impressive job driving revenues and reducing our cost structure.”

Under an agreement announced two weeks ago, the US government would increase its equity share in Citigroup to up to 36 percent, becoming the bank’s largest shareholder.

The deal, which calls for the bank to offer as much as 27.5 billion dollars of its preferred shares while federal authorities would match the exchange with up to $25bn, “is expected to make Citi the strongest capitalized large US bank” by capitalization ratio, Pandit said.

While the Federal Reserve is to conduct a “test” to determine the capital needs of US banks, “we’ve done our own stress testing using assumptions that are more pessimistic than the Fed has outlined and we are confident about our capital strength,” Pandit added.

But he acknowledged that he was “disappointed” with Citigroup’s stock price, which fell below one dollar Thursday for the first time in the bank’s history, and “the broad-based misperceptions about our company and its financial position.”

Investors have largely shunned the bank, now partially nationalized as federal authorities could own over a third of Citigroup’s capital under the preferred exchange.

Addressing investor concerns, Pandit said that Citigroup expected “to be able to realize the majority of our DTAs” (tax deferred assets), even if economic conditions “deteriorate significantly,” and said the bank’s deposits were “relatively stable.”