Citigroup Inc., one of the largest banks in the world, reported its third straight quarter of profit Monday in another sign that the American consumer is healing.
The New York bank, which is still 12 percent owned by the government, earned $2.15 billion, or 7 cents per share, in the three months ending in September. The results were better than analysts were expecting, and compared to a loss of $3.24 billion, or 27 cents per share, during the same period last year. Citi's stock rose nearly 4 percent, lifting shares of other banks along with it.
Almost all of the profit came from dipping into funds that Citi had previously set aside to cover bad loans. That reflects the bank's increasing level of confidence that its customers will be able to make payments on credit card and mortgage loans in the future.
In an encouraging sign, losses from bad loans fell 30 percent during the quarter to $7.66 billion as defaults in Citi's retail partner cards, Citi-branded credit cards and real estate portfolios all fell. It was the fifth consecutive quarter of declining losses from soured loans.
The improvement in Citi's earnings came as the bank released $1.97 billion in money it had previously set aside to cover bad loans.
Citigroup was one of the hardest-hit banks during the financial crisis of 2008 and received $45 billion in government aid, $25 billion of which was converted to stock. The government continues to reduce its stake in Citigroup and has indicated that it plans to sell off the entire stake by December.
So far, Citi has managed to steer clear from the ongoing foreclosure mess that has ensnared other major U.S. banks. Rivals Bank of America Corp. and JPMorgan have stopped most or all their foreclosures because of evidence that thousands of foreclosures were handled improperly.
"We believe that our overall process is sound and our reviews indicate that nothing is amiss," John Gerspach, Citi's chief financial officer, said in a call with reporters.
Citi also benefited from having a global profile; more than half of the bank's revenue comes from overseas. While revenues from North America and Europe fell, Citi was able to take advantage of growth in emerging markets. Revenues from Latin America and Asia both grew.
"Citi is well-positioned to participate in a credit quality cleanup in the U.S. and also the high pace of growth in Latin America and Asia," said Anthony Polini, managing director at Raymond James.
Overall, there were 19 percent fewer consumers who were late by 90 days or more on payments on credit cards, Citi reported. Those that were late by 30 days also declined 24 percent. The drop in delinquencies is a signal that consumers are starting to get their footing again. Rival banking giant JPMorgan Chase & Co. also reported better results last week as losses narrowed from failed loans. Bank of America Corp. reports results Tuesday.
Citi's shares rose 14 cents, or 3.7 percent, to $4.09 in morning trading.