SURPRISE: CITI PROFIT CLIMBS /

Analyst views bested as firm recoups funds previously set aside for loan losses

new york — Citigroup, the thirdbiggest US bank, reported an unexpected profit increase, beating analysts’ estimates as the company recouped funds previously set aside for loan losses.

First-quarter net income climbed 3.5 per cent to $3.94 billion, or $1.23 a share, from $3.81 billion, or $1.23, a year earlier, the New York-based company said on Monday in a statement.

Excluding accounting charges and a tax item, profit was $1.30 a share. The average estimate of 27 analysts surveyed by Bloomberg was $1.14.

Chief executive officer Michael Corbat, 53, is getting help from an improving global economy that’s making it easier for consumers and businesses to repay loans. Citigroup released $673 million in loan-loss reserves set aside in earlier years, exceeding the $500 million at Wells Fargo & Co and the $227 million estimate of Matt O’Connor, a Deutsche Bank analyst.

“We expect that there is enough juice left in credit costs” to boost quarterly results for the industry, Chris Kotowski, an Oppenheimer & Co analyst, wrote in an April 3 note. He assigns the equivalent of a buy rating to Citigroup’s stock.

Profit was also boosted by improving results in a portfolio of unwanted assets the bank has marked for sale. Losses in the Citi Holdings unit where the bank keeps those assets narrowed to $284 million in the first quarter from $804 million a year earlier.

Corbat was dealt a setback to his turnaround plan last month when Citigroup failed an annual stress test administered by the Federal Reserve, which cited deficiencies in the bank’s ability to project revenue and losses in its global operations. Regulators rejected the company’s request to quintuple its dividend and repurchase $6.4 billion of shares.

“The capital return path that we expected to become clearer in 2014 has been delayed, Matt Burnell, an analyst at Wells Fargo, wrote in an April 7 report.

The delay probably dents prospects for achieving Corbat’s 2015 goal of reaching a 10 per cent return on tangible common equity, Burnell wrote. Corbat is struggling to boost revenue from the fixedincome business, where the lender ranked No. 2 last year among its largest peers, data compiled by

Bloomberg show. Bond trading, which marred the company’s two prior quarterly earnings results, fell 18 per cent to $3.85 billion in the first quarter. Revenue from bond trading at JPMorgan Chase & Co fell 21 per cent to $3.76 billion, the New York-based bank said last week.

Citigroup chief financial officer John Gerspach told investors on March 3 that capital-markets revenue would drop by a ‘‘high midteens” percentage. —