Citigroup Profit Up 29% but Shares Fall

Citigroup reported a 29% increase in first-quarter earnings Thursday, but its share price fell amid investor worries that likely increases in interest rates could hamper future profit.

The nation’s largest financial institution said that its net income totaled $5.27 billion, or $1.01 a share, in the January-March period, up from $4.1 billion, or 79 cents, a year earlier.

The results included an after-tax gain of $180 million, or 3 cents a share, from the sale of part of Citigroup’s electronic funds services business, the bank said.

The results exceeded the 94 cents expected by analysts surveyed by Thomson First Call.

Still, Citigroup’s shares were down $1.03, or 2%, to $49.92 on the New York Stock Exchange.

Shares in other banks and financial services companies also were down Thursday, as they have been in recent days, because of investor concerns that increases in interest rates could hurt mortgage lending and other rate-sensitive businesses.

Citigroup’s share price decline “is not related to earnings, it’s related to worries about higher interest rates,” said James Schmidt, portfolio manager of the John Hancock Regional Bank Fund in Boston.

Citigroup reported double-digit growth in all nine of its product lines as well as stronger performance in all six global regions where it operates.

Revenue rose to $21.5 billion, a 16% increase from a year earlier, the largest gain in 3 1/2 years. Expenses rose 11% as marketing costs increased and the company paid $270 million to cover options, pensions and litigation. Assets rose 16% to $1.32 trillion.

“They’ve gotten back to getting operating leverage, where revenue grows faster than expenses in virtually every business line,” said Bob Maneri, who helps invest $49 billion at Victory Capital Management in Cleveland.

Citigroup has more than 200 million customer accounts.

Other banks reporting earnings Thursday included San Marino-based East West Bancorp Inc., which said its first-quarter profit rose 44% to $16.9 million, or 67 cents a share, compared with $11.8 million, or 48 cents, a year earlier.

The bank’s return on assets, a key performance indicator, rose to 1.60% in the quarter from 1.42% in the year-earlier period.

Separately, Cathay General Bancorp, the L.A.-based holding company for Cathay Bank, said first-quarter net income jumped 59% to $19.9 million, or 79 cents a share, from $12.5 million, or 69 cents, a year earlier.

Cathay’s return on assets fell to 1.45% in the quarter from 1.79% a

year earlier.

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Associated Press and Reuters were used in compiling this report.