Investors “looking for yield” helped drive gains in securitized products during the quarter, especially for mortgage-related products, Chief Financial Officer John Gerspach said on a conference call with journalists.
Citigroup’s fixed-income trading business was the second- biggest in the world in 2012, according to research from analytics firm Coalition Ltd. The division employs Andy Morton, interest-rates trading head, Carey Lathrop, head of credit- trading, and Howard Marsh, who leads municipal bond trading.
Corbat oversaw a loan-loss reserve release of $652 million, allowing his bank to boost profit with funds that had been designated to cover future costs on bad loans. Trone had expected a $420 million release while Richard Staite, an analyst in London with Atlantic Equities LLP, had predicted $175 million.
Citi Holdings, the part of the bank that contains distressed and unwanted assets, posted a $794 million loss, down from $1.02 billion a year earlier. Assets at the division, overseen by Eugene “Gene” McQuade, 64, fell 29% to $149 billion.
The bank had a loan-loss reserve release of $351 million in the Citi Holdings unit.
“We believe investors are responding to the emergence of two long-awaited trends, including a mortgage loan-loss reserve release in Citi Holdings and DTA utilization, albeit both by modest amounts,” Jason Goldberg, an analyst with Barclays Capital Inc. in New York, said in an e-mail.
Investment banking, which includes advising clients on mergers and acquisitions and helping them sell shares and bonds to the public, posted revenue of $1.1 billion, a 22% increase. Staite at Atlantic Equities had estimated revenue of $920 million.
Citigroup’s underwriting unit, run by Tyler Dickson, benefited as investors bought more junk bonds and shares through public offerings. The bank helped clients sell $12.3 billion of junk bonds in the quarter, compared with $10.6 billion a year earlier, according to data compiled by Bloomberg.
The firm underwrote $14.2 billion of global share sales, 23% more than the same quarter in 2012, the data show.
The consumer bank, run by Co-President Manuel Medina-Mora, 62, posted a $1.95 billion profit, compared with $2.18 billion in the same quarter last year. Staite had predicted $2.1 billion.
Revenue at the division, which had operations in almost 40 countries last year, was almost unchanged at $10 billion. Staite had estimated $10.3 billion.
Citigroup’s advisory unit, overseen by Raymond J. McGuire, garnered $204 million in fees from advising clients on mergers and acquisitions in the quarter, compared with $110 million a year earlier.