Shares jumped 2.8% in premarket trading as results comfortably beating estimates .Citigroup reported a profit of $3.94 billion, up from $3.81 billion for the first quarter of 2013. On a per-share basis, which includes the payment of preferred dividends, earnings were flat at $1.23. Stripping out one-time items and accounting adjustments, per-share earnings rose to $1.30 from $1.29.Revenue edged down 0.6%--or 2.2% on an adjusted basis, which is comparable to analysts' estimates--to $20.12 billion.
Citigroup's stronger-than-expected results are likely a welcome respite for Chief Executive Michael Corbat, who has been grappling with a number of problems after early momentum in his new role. Last month, the bank failed to get Federal Reserve approval to reward investors with higher dividends and stock buybacks, a blow that took the bank's executives by surprise. The rejection also made it less likely that Citigroup will hit its 2015 goal for return on tangible common equity. The Fed's decision came after Citigroup disclosed potential fraud at its Mexico unit that led it to restate results for 2013.
In prepared remarks on Monday, Mr. Corbat characterized the quarter as a "difficult" one for Citigroup. Still, profit rose 61% from the fourth quarter, when Citigroup's earnings missed analyst expectations.
Like its peers, Citigroup has grappled with weak trading revenue, with Chief Financial Officer John Gerspach warning in March that the bank's markets revenue would fall in the first quarter by "a high midteens percentage," from the year-earlier quarter.
For the first-quarter Citigroup reported its fixed-income trading revenue fell 18% from a year earlier to $3.85 billion, on what Citigroup said was a result of "the uncertain global macro environment as well as strong performance in the prior year in securitized products and local markets rates and currencies."
Trading revenue at big banks is both significant and volatile, based on factors ranging from investor sentiment to interest rates. Citigroup's fixed-income markets results showed less of a decline than those of rival J.P. Morgan Chase & Co., which on Friday reported its fixed-income revenue had slumped 21% from a year earlier.
Like other big banks, Citigroup's results were also hurt by lower mortgage originations than in the prior quarter as the refinancing boom continues to wane amid higher interest rates. Mortgage originations tumbled sharply to $5.2 billion from $18 billion a year earlier and $8.3 billion in the fourth quarter.
Still, Citigroup showed progress in reining in expenses. First-quarter operating expenses edged down 1.1% from a year earlier to $12.15 billion as expenses tied to furthering cost-cutting efforts fell 43%.
The decline came even as Citigroup reported its legal costs were up at $945 million, compared with $710 million a year ago and $809 million in the fourth quarter. The bank's CFO had previously warned that legal-related expenses would remain "elevated for the foreseeable future."
In a recent research note, analysts at Evercore said they expect investors to focus on Citigroup's expense plans given the Fed's objections to its capital plans, and the "perception that Citi may indeed need to invest much more to be compliant."
Like its peers, Citigroup has also benefited from loan-loss reserve releases, which generally accompany improved consumer health and rising home prices. For the first quarter, the bank was helped by its loan-loss reserve release rising 3.5% from a year earlier to $673 million. Meanwhile, provisions for loans gone bad dropped about 20% to $18.9 billion.
The bank reduced its deferred tax asset by roughly $1.1 billion, which Mr. Corbat noted was more than any other quarter since the financial crisis. These tax assets, which can be applied against future tax bills, are due to losses Citi racked up during the crisis.