Citigroup: Financial Winner
The major U.S. equity indices were mixed, following a report from the Commerce Department that retail sales increased 0.8% in March, compared with a rise of 1% in February. Excluding auto purchases, sales also rose 0.8%, topping estimates, compared with an increase of 0.9% in February.
Also on Monday, the National Association of Home Builders said that its April housing market index declined three points to 25, its first decline in seven months, "where it was in January, which was the highest level since 2007."
NAHB chairman Barry Rutenberg said that "although builders in many markets are noting increased interest among potential buyers, consumers are still very hesitant to go forward with a purchase, and our members are realigning their expectations somewhat until they see more actual signed sales contracts ."
The KBW Bank Index (I:BKX) rose over 1% to close at 47.66.
As for Citigroup, before the opening bell, the company reported a first-quarter profit excluding items of $1.11 a share, beating the average estimate of analysts polled by Thomson Reuters for earnings of $1 per share.
Citi's revenue came in short, though, at $19.4 billion vs. the consensus estimate of $19.81 billion -- however, the story improved upon deeper examination.
Leaving out credit valuation adjustments (CVA) and debit valuation adjustments (DVA) for all periods, Citigroup's first-quarter revenue was $20.7 billion, increasing from $17.2 billion in the fourth quarter and $20.0 billion during the first quarter of 2011.
The Institutional Clients Group saw total fourth-quarter revenue of $8.0 billion, compared to $5.8 billion the previous quarter, and $8.6 billion a year earlier. The group's first-quarter profit totaled $2.2 billion, increasing from $633 million in the fourth quarter, but declining from $2.5 billion in the first quarter of 2011, on lower revenue from principal transactions.
For the Global Consumer Banking division, total first-quarter revenue was $10.0 billion, increasing from $9.9 billion the previous quarter, and $9.6 billion, a year earlier. The division's profit grew 27% sequentially and 14% year-over-year, to $2.2 billion, mainly because credit costs continued to decline.
Retail banking revenue grew 9% sequentially and 15% year over year to $4.5 billion, "largely due to improved results in mortgages," following the industry trend, with President Obama's expanded Home Affordable Refinance Program, or HARP 2, allowing certain mortgage borrowers to refinance their entire loan balances at today's low rates, no matter how much the value of the underlying homes have dropped.
Following the solid mortgage numbers reported on Friday by JPMorgan Chase and Wells Fargo, FBR analyst Paul Miller on Monday said that that "HARP has not fully ramped up," so investors are likely to expect a strong second quarter for Citigroup's mortgage operations.