Citigroup Profit Down, Others Gain

reuters.com Tue January 21, 2003 04:12 PM ET By Mary Kelleher

NEW YORK (Reuters) - Citigroup Inc. on Tuesday posted lower fourth-quarter results, dragged down by charges from Wall Street's stock-research scandal and lawsuits related to Enron Corp., while earnings at Wells Fargo & Co. and U.S. Bancorp rose on mortgage and deposit gains.

Consumer operations flourished at all three banks as low interest rates fueled credit card use and home loan growth and as rocky stock markets prompted people to put their money into bank accounts rather than equities.

But Citigroup, the world's No. 1 financial services company, and other top banks were burned by their dealings with once high-flying companies that later collapsed, such as energy trader Enron ENRNQ.PK . Smaller, more regionally focused banks like Wells Fargo avoided such losses.

Bigger banks with large Wall Street operations also fared worse in the quarter because of the weak stock market.

New York-based Citigroup C.N said fourth-quarter profit fell 37 percent to $2.43 billion, or 47 cents a share, after $1.55 billion in charges. Citigroup also forecast double-digit income growth this year.

San Francisco-based Wells Fargo WFC.N , the No. 4 U.S. banking company, earned $1.47 billion, or 86 cents a share, up 10 percent from a year earlier.

And Minneapolis-based U.S. Bancorp USB.N , No. 8, said its profit rose 22 percent to $849.8 million, or 22 cents a share, after merger and restructuring-related charges.

Growth in consumer loans like credit cards and home equity lines of credit bolstered the banks' results, but Citigroup battled some specific problems, including the settlement of charges that it and other Wall Street firms issued biased research in order to win investment banking business.

Citigroup took a charge to cover lawsuits over financing it set up for bankrupt energy trader Enron.

"We're thrilled we can talk about the year 2002 in the past," Citigroup Chief Executive Sanford "Sandy" Weill told analysts and reporters on a conference call. Turmoil in Latin American countries like Brazil, Venezuela and Argentina cost Citigroup about $1.1 billion last year, while exposure to a raft of corporate frauds like bankrupt telecommunications company made Citigroup boost its loan loss reserves by $1.4 billion last year, Weill said.

Still Citigroup earned $15.28 billion last year, probably more than any other company in the world, Weill said.

Citigroup also said Tuesday it raised its quarterly dividend 11 percent, to 20 cents a share.

CITIGROUP MEETS ANALYSTS' ESTIMATES

Analysts said Citigroup met Wall Street expectations and produced respectable results in a difficult environment, helped by tight cost controls and diverse sources of earnings.

"The company continues to demonstrate extremely strong expense control in a number of areas, helping to offset limited revenue growth or revenue shrinkage, particularly in markets- related businesses," said Diane Glossman, an analyst at USB Warburg.

Citigroup also said it would deliver double-digit income growth this year following an 8 percent rise for all of 2002.

Citigroup's fourth-quarter earnings of 47 cents a share were a penny above the average Wall Street estimate as compiled by market data firm Thomson First Call. Analysts' estimates ranged from 44 cents to 49 cents, according to First Call.

Citigroup earned $3.88 billion, or 74 cents a share, in the year-earlier fourth quarter.

Profits at Citigroup's consumer group, which includes credit cards and retail banking, rose 26 percent to $2.37 billion.

But its corporate and investment bank posted a $344 million loss in the quarter, after a $1.3 billion charge for the research settlement and Enron litigation. The corporate and investment bank reported a profit of $905 million in the 2001 fourth quarter.

Lehman Brothers analyst Brock Vandervliet said Citigroup's results were "right in line with our estimate."

"The global corporate and investment bank wasn't quite as strong as we had hoped in terms of revenue and net income performance, but the consumer business was a bit stronger than what we'd been looking for," he said.

WELLS FARGO MORTGAGE UNIT PRODUCES GAINS

Wells Fargo's enormous mortgage banking operation benefited from low interest rates, which spurred growth in home equity lending and refinancing. Rates have stayed low because the U.S. economy remains sluggish.

"Wells really stands out this quarter from the pack," said Jennifer Thompson, an analyst at Putnam Lovell. "Revenue growth was very strong and it wasn't just mortgages. They had strong growth across the board."

Wells Fargo's fourth-quarter profit of 86 cents a share matched analysts' average forecast, according to First Call, and was up from $1.33 billion, or 77 cents a share, a year earlier.

The bank's net interest income, or money it makes from lending, rose 13 percent to $3.89 billion.

"Consumer loans once again increased significantly in the fourth quarter," Wells Fargo Chief Financial Officer Howard Atkins said on a prerecorded conference call. "The primary contributor to consumer loan growth was once again the tremendous success we experienced in growing home equity loans and lines."

Bank shares were weak in afternoon trading. Citigroup was down 74 cents to $36.06, Wells Fargo fell 7 cents to $47.20 and U.S. Bancorp fell 24 cents to $22.19.