Citigroup posts $468-million Q3 profit on tax benefit

NEW YORK: Citigroup, the third-biggest US bank, reported a $468 million profit for the third quarter, beating analysts' estimates on a $582 million tax benefit and a surge in bond-trading revenue.

The profit, which included a $2.9 billion writedown on the Smith Barney brokerage, was 15 cents a share, and compared with profit of $3.77 billion, or $1.23 a share, a year earlier, the New York-based bank said on Monday in a statement. Excluding one-time adjustments and the tax benefit, profit was $1.06 a share, beating the 97-cent average estimate of 25 analysts surveyed by Bloomberg News.

Chief executive officer Vikram Pandit, 55, is cutting jobs and shedding unwanted assets, including a 49% stake in Smith Barney, as he seeks to return capital to shareholders and comply with new regulations on buffers against losses. Revenue from fixed-income trading surged 63% excluding accounting adjustments after tumbling last year during the European sovereign-debt crisis.

"Citigroup remains a company that has been steadily profitable for some period of time," Todd Hagerman, an analyst with Sterne, Agee & Leach, who rates the shares neutral, said before earnings were released. "They have a lot going for them in terms of their relative balance-sheet strength as well as the consistency of their earnings."

Fixed-income revenue rose to $3.7 billion, excluding $672 million of so-called credit-valuation adjustments tied to the firm's bond spreads. The increase resulted from "significantly higher trading revenues in credit-related and securitised products, as well as strong performance in rates and currencies," the bank said in the statement. Moshe Orenbuch, an analyst with Credit Suisse Group AG, had estimated fixed-income trading revenue of $2.96 billion. David Trone, a JMP Securities analyst, predicted $3.11 billion.

"Our core businesses showed momentum during the quarter as we increased lending and generated higher operating revenues," Pandit said in the statement.

Pandit agreed in September to sell Citigroup's stake in the Smith Barney joint venture to its partner, Morgan Stanley (MS), after the two firms argued over the brokerage's worth. The deal forced Citigroup to write down the value of its stake.