Citi posts $4.28 bn profit

Citigroup Inc posted a $4.28 billion profit, less than analysts estimated, as surging loan losses cut into a gain from selling control of the Smith Barney brokerage unit.

Second-quarter earnings were 49 cents a share, compared with a loss of $2.5 billion, or 55 cents, a year earlier, New York-based Citigroup said on Saturday in a statement. Excluding the Smith Barney gain of $6.7 billion, Citigroup had an operating loss of 62 cents a share.

That compared with a 33-cent average loss estimate of 12 analysts in a Bloomberg survey. Consumer and business loan delinquencies kept rising, giving Chief Executive Officer Vikram Pandit little relief from the financial crisis that forced him to take a $45 billion government bailout and unload some of his biggest units.

The bank, once the nation’s largest by assets, now ranks third after Bank of America Corp and JPMorgan Chase & Co.

“This company is going to be shrinking,” said Ed Najarian, an analyst at institutional brokerage International Strategy & Investment Group in New York. “You’ve got to factor that into your analysis of the ability to absorb losses over the next 18 months.”

The bank’s costs for bad loans in the quarter jumped by 75 per cent to $12.2 billion. Late credit-card loans increased to 3 per cent of the total, from 2.1 per cent a year earlier.

Smith Barney, now part of a joint venture controlled by former Pandit employer Morgan Stanley, had $10.2 billion of revenue last year, or 19 per cent of Citigroup’s total.

The results included costs of $1.6 billion taken under a bookkeeping rule that forces banks to account for increases in the market value of some of their liabilities. Citigroup recorded a $2.5 billion gain from the rule in the first quarter, when concerns about the bank’s creditworthiness led to declines in the value of the liabilities. Investor confidence in Citigroup rose during the second quarter, as measured by prices for its bonds, leading to an increase in the liability values.