Citigroup having its best quarter since 2007, Pandit tells staff

Citigroup Inc Chief Executive Officer Vikram Pandit said his bank is having the best quarter since 2007, when it last posted a profit.

“I am most encouraged with the strength of our business so far in 2009,” Pandit wrote in an internal memorandum obtained today by Bloomberg. “In fact, we are profitable through the first two months of 2009 and are having our best quarter-to-date performance since the third quarter of 2007.” The bank had $19 billion of revenue in January and February before disclosed writedowns, he added.

Citigroup has logged five quarters of losses totalling more than $37.5 billion since it posted a $2.1 billion profit in the third quarter of 2007. Once the world’s biggest bank by market value, it fell below $1 in New York trading last week for the first time, as investors lost confidence that the shares can recover after losses and a government rescue.

“I am, like you, disappointed with our current stock price and the broad-based misperceptions about our company and its financial position,” Pandit wrote. The price doesn’t reflect the bank’s capital strength and earnings potential, he added.

The New York-based bank traded at $1.20 in Germany today, 14 per cent higher than yesterday’s New York closing price. The stock has tumbled 95 per cent in the past year, cutting the bank’s market value to about $5.8 billion, less than Japan’s Nomura Holdings Inc and Turkey’s Akbank TAS, in which Citigroup owns a 20 per cent stake. The bank is the smallest company and the worst-performing stock in the 30-member Dow Jones Industrial Average.

Government stake
The government’s plan to exchange its preferred stock for common shares will make Citigroup the strongest US bank measured on tangible common equity, Pandit added. The transaction will also make the government Citigroup’s biggest shareholder, with a 36 per cent stake.

The US government is examining ways to further stabilise Citigroup if needed, The Wall Street Journal reported today, citing people it didn’t identify. Federal officials called the steps “contingency planning” and aren’t expecting a sudden turn for the worse, the Journal said.

Citigroup’s deposits are “relatively stable,” Pandit said in his memo to employees. The bank has also conducted its own stress tests, using assumptions more pessimistic than the Federal Reserve’s, he added. Citigroup is “confident” about its capital strength. Expenses totalled $8.1 billion in the year through February, less than Citigroup’s target, Pandit said.