Citigroup Inc reported higher third-quarter earnings on Monday, helped by rising income from Asia and an accounting gain banks can take in turbulent markets.
Even stripping out the accounting game, the results were better than some analysts had expected, and Citi shares rose as much as 3.8 percent in early trading. At mid-morning they were up 1.4 percent to $28.79.
Like its rivals, Citigroup was hit by the European debt crisis and the sluggish U.S. economy. Investment banking fees dropped, and its loan book fell 2 percent. Operating expenses rose, in part because of investments the bank is making to boost its business.
Citigroup's extensive overseas operations helped the bank during the quarter, particularly in Asia, where income from continuing operations at its consumer banking business rose 14 percent.
The bets they're making in the international markets are paying off, said Michael Holland, founder of Holland & Co LLC in New York.
Citigroup, the third-largest U.S. bank by assets, reported net income of $3.77 billion, or $1.23 per share, up from $2.17 billion, or 72 cents per share, in the same quarter last year.
The third-quarter results included a pre-tax gain of $1.9 billion, or 39 cents per share after taxes, due to the bank's widening credit spreads during the quarter. When a bank's debt weakens relative to U.S. Treasuries, it can record an accounting gain because it could profit from buying back debt.
Excluding that gain, Citi earned $2.6 billion, or 84 cents per share.
Revenue at the bank's continuing securities and banking business fell 12 percent excluding the debt value adjustment, to $4.84 billion, hurt by declining underwriting and merger advisory fees.
JPMorgan Chase & Co also reported declines in investment banking fees when it reported third-quarter results last week. JPMorgan also reported an accounting gain identical to Citi's.
Overall operating expenses for Citigroup rose 8 percent from a year earlier. Operating expenses were $12.46 billion and have been hovering around that level since the fourth quarter of 2010. From the beginning of 2009 through the third quarter of 2010, quarterly operating expenses were typically closer to $11.9 billion.
It was not immediately clear if the quarterly earnings were comparable to analysts' average forecast of 81 cents per share, according to Thomson Reuters I/B/E/S. But several analysts said earnings of 84 cents per share excluding the accounting gain beat the Street.
Citi, which received three U.S. government rescues at the height of the financial crisis, is seeing its problem loan portfolio shrink.
Nonaccrual loans fell to $7.95 billion from $12.46 billion a year earlier.
The bank's share price has fallen about 40 percent this year, in line with declines for other large banks.
(Reporting by Joe Rauch in Charlotte, N.C.; editing by John Wallace)