Citigroup Inc. (NYSE: C) today reported net income for the first quarter 2013 of $3.8 billion, or $1.23 per diluted share, on revenues of $20.5 billion. This compared to net income of $2.9 billion, or $0.95 per diluted share, on revenues of $19.4 billion for the first quarter 2012.
CVA/DVA was $(319) million ($(198) million after-tax) in the first quarter, mainly resulting from the improvement in Citigroup’s credit spreads, compared to $(1.3) billion ($(800) million after-tax) in the prior year period. First quarter 2012 results included a net gain of $477 million on minority investments ($308 million after-tax)5. Excluding CVA/DVA in both periods and the gain on minority investments in the first quarter 2012, first quarter 2013 revenues increased 3% from the prior year period to $20.8 billion. First quarter 2013 earnings were $1.29 per diluted share, representing a 16% increase from prior year earnings of $1.11 per diluted share (excluding CVA/DVA and the gain on minority investments in first quarter 2012), as higher revenues and lower net credit losses were partially offset by higher legal and related expenses, a lower loan loss reserve release and a higher effective tax rate.
Michael Corbat, Chief Executive Officer of Citi, said, “Achieving consistent, high-quality earnings is one of my top priorities and these results are encouraging. During the quarter, we benefitted from seasonally strong results in our markets businesses, sustained momentum in investment banking, continued year-over-year growth in loans and deposits in Citicorp, and a more favorable credit environment. However, the environment remains challenging and we are sure to be tested as we go through the year.
“In addition to our performance across business lines, there were several other areas where we made progress. We reduced the drag on earnings caused by Citi Holdings and utilized a modest amount of our deferred tax assets. Our capital strength again improved during the quarter with the Tier 1 Common Ratio increasing to an estimated 9.3% on a Basel III basis. It is critical that Citi be viewed as an indisputably strong and stable institution and we made progress towards that goal,” Mr. Corbat concluded.
Citigroup revenues of $20.8 billion in the first quarter 2013 increased 3% from the prior year period, excluding CVA/DVA and the gain on minority investments in the first quarter 2012. This increase was driven by 2% growth in Citicorp revenues and 15% growth in Citi Holdings revenues.
Citicorp revenues of $19.6 billion in the first quarter 2013 included $(310) million of CVA/DVA reported withinSecurities and Banking. Citicorp revenues of $19.9 billion increased 2% from the prior year period, excluding CVA/DVA and the impact of minority investment in the first quarter 2012. Securities and Banking revenues grew 8% (excluding CVA/DVA), Global Consumer Banking (GCB) revenues were flat and Transaction Services (CTS) revenues were down 4%, all versus the prior year period.
Citi Holdings revenues of $901 million in the first quarter 2013 included $(9) million of CVA/DVA. Excluding CVA/DVA, Citi Holdings revenues were $910 million, up 15% versus the prior year period. Higher revenues in the Special Asset Pool drove the improvement in Citi Holdings revenues from the prior year period reflecting lower asset marks and lower funding costs. The improvement in Special Asset Pool revenues was partially offset by a decline in Local Consumer Lending revenues, mainly due to the continuing decline in assets. Total Citi Holdings assets of $149 billion declined $60 billion, or 29%, from the first quarter 2012. Citi Holdings assets at the end of the first quarter 2013 represented approximately 8% of total Citigroup assets.
Citigroup’s net income rose to $3.8 billion in the first quarter 2013 from $2.9 billion in the prior year period. Excluding the impact of CVA/DVA and the gain on minority investments in the first quarter of 2012, Citigroup net income increased 17% to $4.0 billion. This increase was driven by revenue growth and lower net credit losses, partially offset by higher expenses, a lower loan loss reserve release and a higher effective tax rate. Operating expenses of $12.4 billion were 1% higher than the prior year period mainly reflecting an increase in legal and related costs and repositioning charges. Citigroup’s cost of credit in the first quarter 2013 was $2.5 billion, a decrease of 16% over the prior year period, reflecting a $994 million improvement in net credit losses partially offset by a $513 million decline in net loan loss reserve releases. The higher effective tax rate reflected both higher earnings in North America as well as a higher tax rate on international operations due to a first quarter 2013 change in the assertion that earnings in certain international entities would be permanently reinvested outside the U.S.
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