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Citi Profit Falls, but Tops Estimates; Shares Move Higher

CNBC.com With Reuters
Monday, 15 Oct 2012 | 9:10 AM ET

Citigroup reported quarterly earnings that beat analysts' expectations on Monday, sending shares higher in premarket trading.

The company posted third-quarter earnings excluding items of $1.06 per share, down from $1.23 a share in the year-earlier period. (Click here to get the latest quotes for Citigroup.)

Revenue decreased to $19.4 billion from $20.83 billion a year ago.

Analysts had expected the company to report earnings excluding items of 96 cents a share on $18.71 billion in revenue, according to a consensus estimate from Thomson Reuters.

Shares rose nearly 3 percent on the news.

Citigroup is the third major bank to report earnings in what is forecast to be one of the worst quarterly seasons for companies since late 2009. JPMorgan Chase beat earnings and revenue forecasts, but Wells Fargo's light revenue disappointed investors.

Inside Citi's Q3 Earnings Beat
CNBC's Kayla Tausche reports shares of Citi are trading higher after beating both the top and bottom line, and Jason Goldberg, Barclays analyst, discusses his "Overweight" rating and $46 price target on the big bank; while Todd Hagerman, Sterne Agee analyst, weighs in with his "Neutral" rating and $33 price target.

Both early reports have sparked concern over tightening profit margins for the country's biggest banks.

Citigroup said quarterly profit plunged on a $4.7 billion writedown of its stake in a brokerage operated by Morgan Stanley, but mortgage lending increased and capital markets results rebounded.

The New York-based global bank on Monday said third-quarter net income was $468 million, or 15 cents a share, compared with $3.77 billion, or $1.23 a share, a year earlier.

Adjusted earnings, excluding the previously announced writedown and an accounting charge for the change in the value its debt, was $3.27 billion, or $1.06 cents a share, compared with $2.57 billion, or 84 cents a share, a year earlier.

The adjusted results also included a benefit of 19 cents a share for the resolution of tax audit items.

The bank said profits from the Securities and Banking unit increased 67 percent on stronger revenue from fixed income and equity markets and lower expenses. The North American consumer banking segment saw an 18 percent increase in profits on higher mortgage revenues.

Results outside the U.S. were generally weaker, with income from International Consumer Banking down 3 percent, and profits in transaction services provided to businesses and governments outside North America down by single-digit percentages.

In September, Citigroup agreed on a price to sell its 49 percent interest in the brokerage to Morgan Stanley. At the time, it said it would take a charge to reduce its carrying value for the asset by about 40 percent.

The joint venture was created in the financial crisis in 2009 as a way for Citigroup to shrink by transferring its Smith Barney brokerage assets to Morgan Stanley.

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