Citigroup Swings To 1Q Profit On Fewer Write-Downs

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Citigroug Inc. (C) took something of a break from the financial crisis with strong results reflecting a rebound in capital markets.

The bank that has become one of the posterchildren of the crisis swung to $1.6 billion profit, even if earnings per share remained at a loss. "We are pleased with our performance," said Chief Executive Vikram Pandit in the press release - a noteworthy statement in light of dismal results for the previous five consecutive quarters.

To call the results a recovery, however, might be a stretch. Like capital market competitors JPMorgan Chase & Co (JPM) and Goldman Sachs Group Inc. (GS), revenue benefited from a resilient bond market generating results that may not be sustainable, and loan losses will continue to rise until the economy - and for Citi, the world economy - turns around.

But the company made progress in cutting costs - headcount is down another 13,000 - and it held on to customers, particularly in businesses tied to capital markets.

Citi also said its proposed preferred-stock conversion won't be launched until the government finishes its industrywide stress tests in the coming weeks.

The news helped push shares up 9.7% premarket to $4.40. The stock has quadrupled in the past month amid a short-squeeze tied to the planned conversion and the potential that Citigroup returned to the black for the quarter.

The bank is still roiling from its mortgage-related securities and the credit crisis. Investors had started to believe the worst was over as losses narrowed earlier last year. But the company, which was a leader in creating and marketing some of the exotic securities that have been at the heart of the credit crunch, seems to have its woes far from over.

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