Investment bank numbs restructuring pain at Citigroup
Booming trading and equity underwriting propelled first-quarter net profits at Citigroup's markets and banking division up 36% to a record $2.6bn, but a charge related to last week's restructuring plan dragged group profits down almost an eighth to $5bn.
Revenues at Citigroup's markets and banking unit, which covers investment banking, advisory and capital markets businesses, climbed 23% to a record $9bn in the first quarter, powered by record trading in equities and fixed income and supported by record equity underwriting and advisory revenues.
Fixed income trading revenues rose by a fifth to $3.8bn, while equity trading revenues increased more than a quarter to $1.5bn. Net revenues from investment banking, including advisory and underwriting work, rose almost a third to $1.6bn.
The bank's alternative investment division fell from $675m in the first quarter of last year to $562m this year as growth in private equity was offset by lower revenues from hedge funds, the absence of a gain on the the sale of The Travelers Companies shares a $58m tax benefit recorded last year. However, the bank said client capital under management grew 58% from the same period last year.
The performance at the markets and banking unit, where revenues grew faster than at any other division in the first quarter, helped drive group revenues up 15% to a record $25.5bn, but profits fell 11% from $5.6bn a year earlier on the back of a $871m net charge generated by the group-wide restructuring, announced last week. The restructuring is being implemented by chairman and chief executive Chuck Prince, and chief operating officer Robert Druskin.
Citigroup said last week it would book the majority of the charges for the restructuring in the first quarter, with a further $200m before tax booked later this year. The bank will lay off roughly 17,000 staff through the restructuring, which comes after intense pressure from its shareholders to rein back cost growth and boost the bank's business and share price performance.
Prince said today: "We generated strong momentum this quarter, with revenues increasing to a record, driven by growing customer business volumes. We achieved these results while completing our structural expense review, which will help us become a leaner, more efficient organization and lower our rate of expense growth." He added the bank will invest in further business growth and integration, while taking action to improve efficiency and cut costs.
Source: Financial News
Date: 16.04.2007 [ID: 16]