Citi faces weak trading, shrinking loans on recovery path

Citigroup Inc is expected to report a drop in quarterly profit and revenue on Monday, as an uncertain trading environment and weak consumer loan demand hinder its efforts to move past the financial crisis.

Analysts on average expect the third-largest US bank to report first-quarter profit of 9 cents per share, according to Thomson Reuters I/B/E/S. That compares with a year-earlier profit of USD 4.4 billion, or 15 cents per share.

Citigroup is slowly climbing out of the massive hole it dug for itself in the run-up to the financial crisis. In January, the bank posted net income of $10.6 billion for 2010, its first annual profit since 2007.

In March, the bank announced a reverse-stock split, which will reduce the number of shares it has outstanding, and reinstated a nominal dividend. The government has shed all of the Citigroup common shares it acquired over the course of three rescues of the bank.

Now, Chief Executive Vikram Pandit has to prove that Citigroup can move past recovery to growth, despite broad challenges facing the banking industry's attempts to boost profits. Net revenue is expected to drop 19 percent from a year earlier, to about $20.5 billion.

Larger rivals JPMorgan Chase & Co and Bank of America Corp both struggled with shrinking loan books and falling revenue as they reported quarterly results last week. Both banks powered their profits largely by releasing reserves they had set aside for bad loans.

Citigroup's investment banking revenue may also be hurt by a weak trading environment. The stock market during the quarter sagged on Middle Eastern political upheaval, a Japanese earthquake and tsunami that sent the yen to record highs, and markets that were broadly unpredictable.

JPMorgan Chase's bond trading unit performed better than expected last week. But Bank of America's bond trading revenues slumped almost 35 percent from a year earlier, dampening investor hopes that other investment banks would follow JPMorgan Chase's lead.

Citigroup's shares closed down 0.23% at USD 4.42 on Friday. They have lost about 7% since the beginning of 2011.

The bank plans to boost its share price to about USD 45 -- and drastically cut the number of shares it has outstanding -- with a 1-for-10 reverse stock split scheduled for early May.