Citigroup Inc. (C)
Q1 2010 Earnings Call Transcript
April 19, 2010 11:00 a.m. ET

Citigroup Inc. (C)
Q1 2010 Earnings Call Transcript
April 19, 2010 11:00 a.m. ET

Executives

John Andrews – Investor Relations
Vikram S. Pandit – Chief Executive Officer
John C. Gerspach – Chief Financial Officer

Analysts

Glenn Schorr – UBS
James Mitchell – Buckingham Research
Guy Moszkowski – Bank of America/Merrill Lynch
Christopher Kotowski – Oppenheimer
John McDonald – Sanford Bernstein
Betsy Graseck – Morgan Stanley
Michael Mayo – CLSA
Moshe Orenbuch –Credit Suisse
Jason Goldberg – Barclays Capital

Presentation

Operator

Hello and welcome to Citi''s First Quarter 2010 Earnings Review with Chief Executive Officer, Vikram Pandit and Chief Financial Officer, John Gerspach. Today''s call will be hosted by John Andrews, Head of Citi Investor Relations. We ask that you please hold all questions until the completion of the formal remarks, at which time you will be given instructions for the question-and-answer session. Also, as a reminder, this conference is being recorded today. If you have any objections, please disconnect at this time. Mr. Andrews, you may begin.

John Andrews

Thank you, Operator. Good morning, everybody and thank you for joining us today. On our call today, our CEO, Vikram Pandit, will speak first, then John Gerspach, our CFO, will take you through the earnings presentation, which is available for download on our website, citigroup.com. Afterwards, we will be happy to take your questions. Before we get started, I would like to remind you that today''s presentation may contain forward-looking statements. Citi''s financial results may differ materially from these statements, so please refer to our SEC filings for a description of the factors that could cause our actual results to differ from expectations. With that said, let me turn it over to Vikram.

Vikram S. Pandit

John, thank you very much and good morning, everyone. Thank you, again, for joining us today. You''ve seen our results. They were clearly helped by strong capital markets and improving credit but net income of $4.4 billion also reflects the hard work we''ve done to put the company in order. We''ve been completely focused on serving our clients’ need and that has helped drive revenue growth. We have retained our expense discipline and we continue to reduce the risk and size of many of our legacy portfolios. The results of these efforts, combined with an improved operating environment, are reflected in these results, these first quarter results.

$25.4 billion in revenue and operating cost of $11.5 billion, net credit losses were down for the third consecutive quarter, non-performing assets were down for the second consecutive quarter and we had no net build or net release of our loan loss reserves. Securities and Banking produced a net income of $3.2 billion.

As you know, we have significantly restructured this business and today, I believe, we have the right business model and we’re executing well. I see further opportunities in Securities and Banking in the future. GTS made almost $1 billion of net income this quarter and continues to operate at or near record levels despite the low interest rate environment.

International Regional Consumer Banking business also made almost $1 billion of net income this quarter. Revenues were up 11% versus a year ago and credit costs declined by 47%.

We like the client momentum and the credit trends we see in our international markets. North America Regional Consumer Banking was about breakeven, as credit losses in cards remained high.

Our core businesses in Citicorp produced over $5 billion of net income this quarter, earning attractive financial returns. Our non-core businesses in Citi Holdings lost $887 million. Those losses were far less than the $2.6 billion loss last quarter and the $5.5 billion loss of a year ago. The results reflected improving credit, asset reductions and lower risk.

I want to reiterate the comment that I made at the Citi Financial Services Conference last month, about our local consumer lending portfolio, which is the main driver of losses in Citi Holdings. Assuming the U.S. economy does not deteriorate, we currently believe that the expected cumulative pre-provision net revenues, plus existing loan loss reserves, should be sufficient to cover expected net credit losses over time. Finally, our financial strength is substantial, with a Tier 1 common ratio of 9.1%, Tier 1 of 11.2% and total allowance for loan losses of nearly $49 billion or 6.8% of total loans.

Our results today are a reflection of all the progress we''ve made at Citi. None of this success would have been possible without the people of Citi. I would like to take this opportunity to thank my 265,000 Citi colleagues for their hard work, dedication and commitment. That is what has gotten us to this point.