04/15/2013 12:11 pm ET | Updated Apr 15, 2013

Citigroup Reports 30 Percent Jump In Profits

BOSTON -- Citigroup reported a first-quarter profit of $3.8 billion, a 30 percent surge from last year as the bank’s securities and trading operation boosted the company in beating Wall Street’s expectations.

Citi, the third-largest US bank by assets, said it recorded higher revenues, lower losses on soured loans and a wider spread between what it costs to borrow and what it earns off loans and investments, helping the company achieve its highest quarterly profit in three years.

It was the first full three-month period under new chief executive Mike Corbat, who has pledged to reduce headcount and lower expenses as he aims to shrink the sprawling company.

“We benefited from seasonally strong results in our markets businesses, sustained momentum in investment banking, continued year-over-year growth in loans and deposits in Citicorp, and a more favorable credit environment,” Corbat said Monday.

“However, the environment remains challenging and we are sure to be tested as we go through the year,” he added.

Unlike rivals JPMorgan Chase and Wells Fargo, Citi reported a year-on-year increase in revenues and net interest margin, defying expectations that the continued low-interest rate environment would take a bite out of banks’ bottom lines.

Citi said its revenues increased 6 percent to $20.5 billion. Its net interest margin, or the positive difference between what it costs to borrow and what it earns in interest off loans and investments, rose 0.04 percentage points to 2.94 percent.

Low rates benefit borrowers but over time may hurt lenders, who as a result earn less on loans and investments.

Total loans at Citi fell 0.3 percent year-on-year to $646.4 billion. Consumer loans fell 5 percent but corporate lending jumped 8 percent, reflecting the divergence between cautious households still reluctant to take on additional debt and more risk-taking among business borrowers.

"I don't think we've got a real strong consumer driving the economy," John Gerspach, Citigroup's chief financial officer, said on a conference call with news media.

"You take a look at the U.S. consumer, there's a decent amount of deleveraging still underway," he added on a conference call with analysts. "I certainly don't see any releveraging necessarily on the part of the U.S. consumer other than refinancing mortgage loans and perhaps taking out more student lending. Maybe auto loans a little bit."

Bankers have been touting an improved climate for corporate borrowing over the past year.

Revenues from Citi's securities and trading unit increased 31 percent to $7 billion. Income swelled 76 percent to $2.4 billion, beating analysts’ expectations.

Much of the improvement came in the bank’s North America operations, where income improved by $965 million to $1.2 billion. Trading on Wall Street has been boosted by low rates and the improving economy, which as a result of fewer defaults has led to more demand for riskier assets, driving up prices for securities across the board.

Some markets have gotten so hot that it has attracted attention from policymakers in Washington, including those at the Federal Reserve, who have warned of potential overheating.

Citi’s balance sheet shrunk 3.2 percent to less than $1.9 trillion.

In a sign that perhaps the bank is becoming a bit safer, deposits as of March 31 accounted for 55.4 percent of its total borrowings, an improvement from the 44.8 percent ratio Citi reported at the end of the first quarter of 2010.

This article was updated after publication with an additional quote from John Gerspach.

The 10 Biggest Banks In The U.S.