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Bank in profit: the City cheers
Hugo Duncan10 Mar 2009
Shares around the world soared tonight after banking giant Citigroup shocked investors by declaring it had returned to profit.
The troubled Wall Street firm, which has received $60 billion in bail-outs from the US government and is a major London employer, said it was profitable in the first two months of this year.
It fuelled hopes that the worst of the banking crisis could be over and sent shares soaring on both sides of the Atlantic after weeks of carnage.
The FTSE 100 index was up 134.55 to 3676.95 but was still down nearly 20 per cent this year.
The Dow Jones Industrial Average rose 254.32 to 6801.37 in New York.
The bounce came after a bullish email from Citigroup chief executive Vikram Pandit to staff was leaked.
It said: "I am most encouraged with the strength of our business so far in 2009.
"In fact, we are profitable through the first two months and are having our best quarter-to-date performance since the third quarter of 2007."
He said the bank was confident about its capital strength after it had done stress tests using assumptions that were more pessimistic than those of the US Federal Reserve.
"Our client businesses are strong, our deposits are relatively stable and we continue to provide credit to consumer and corporate customers," Pandit told staff.
"You have all done a very impressive job driving revenues and reducing our cost structure, and it is gratifying to see the results first-hand."
But analysts warned the profits did not include billions of dollars of write-downs on toxic assets.
Citigroup has axed 75,000 jobs since the start of the credit crisis including thousands at its Canary Wharf offices.
Mr Pandit said revenues hit $19 billion in January and February — almost equalling the $21 billion for the entire first quarter last year.
Citi recently turned to the US Government for a third bailout as it struggles to survive the carnage in financial markets.
The bank, created by the $85 billion merger of Citicorp and Travelers Group in 1998, will be 36% owned by the US taxpayer.
Reader views (11)
Another 'dead cat bounce', my investable money remains on hold!
- Steve Morgan, Surbiton, 11/03/2009 09:44
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Why is everyone so negative, surely even a small glimmer of hope is better than none, and this news has had a very positive effect on the world stock markets.
Do you people only want to hear that company's are not improving?
- E Sullivan, London, 11/03/2009 08:33
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Please ! Two months of profit on the back of a SIXTY BILLION dollar bailout! CitiGroup should be shutdown and the assets sold. This company has been nothing but a vanity vehicle for execs who cared nothing for losses when they always knew the FED would come to the rescue. This euphoria will be short lived simply because it is not profit - it is accounting!
- Mark, Hong Kong, 11/03/2009 06:04
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If the world starts buying and selling on the basis of one good piece of news (assuming that it's genuine), it makes nonsense of the axiom that true value is already built into share prices.
I don't think most experts can predict better than the rest of us: it's just that they can guess with more technical language at their disposal.
- Mdj E10, london, uk, 11/03/2009 00:22
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Any idiot can make a profit when they are given a blank cheque by the tax payer.
- Thomas, London, 10/03/2009 18:36
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Are people really this stupid? So, they haven't taken further write-downs yet; big deal.
- Ian, Wimbledon, UK, 10/03/2009 18:19
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Not for long, wait and see.
- Dave Davies, Basingstoke, Hants, 10/03/2009 18:17
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Isn't this like the old saying:-
"When I owe you $10,000 it's my problem when I owe you $60,000,000,000 it's your problem
- Peter Glazier, Sao Paulo, Brazil, 10/03/2009 18:14
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That's because they presumably wrote off all their debts to Zero and now have revalued them.I am sure in the next couple of years all the banks will be reporting profits for this very reason.
- Harvey Lawrence, London UK, 10/03/2009 17:47
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This clearly shows that 'the City' still thinks short term. As the saying goes: 'one swallow maketh not summer'.
Will they ever learn?
- Adrian, London Uk, 10/03/2009 17:38
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I think I might declare I was profitable if I was handed 60 billion.
- Frank, Home Counties, England., 10/03/2009 16:52
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