For investors still wondering why Citigroup Inc. chief executive Charles O. Prince keeps pushing the international side of the business, its first-quarter earnings report offered some explanation.
The $1.6 trillion-asset company reported record international revenue but said its domestic consumer and commercial banking operations were a drag on its global consumer operations.
A few times during Citi's conference call with analysts Monday, the CEO said the U.S. consumer business was "not firing on all cylinders" in the quarter.
Mr. Prince, who inherits the title of chairman today with Sanford I. Weill stepping down at the annual shareholders meeting, has said several times in recent months that the company plans to grow faster in foreign markets than in the United States.
Citi's revenue from U.S. banking operations - credit card, retail, consumer lending, and commercial businesses - fell 9% year over year in the first quarter, to $7.26 billion, and its net income fell 4%, to $2 billion.
"We're facing a very favorable credit environment" in the United States, Mr. Prince said. "On the other hand, interest rates are creating a difficult headwind for us."
There were some highlights in its U.S. banking and cards operations. The online Citibank Direct, which opened last month, has generated about $500 million of new deposits for the company, Mr. Prince said.
Also, Citi lowered its U.S. cards division's loan-loss provision 48%, to $395 million, and chief financial officer Sallie L. Krawcheck said a shift in some consumer business from credit cards to mortgages is helping the company cope with a flattened yield curve.
"The fact that mortgages have grown is no accident," she said.
Revenue from the international consumer business - cards, consumer finance, and retail banking - rose 8%, to $4.7 billion, and net income grew 21%, to $1.1 billion., Citi said.
Citi opened 202 branches in 19 countries, including Mexico, Russia, and Brazil, in the three months, against 36 in the United States. It has said it plans to open branches in Kuwait, but Mr. Prince would not say where else it would open them abroad when asked by an analyst. He was ambiguous about its international plans in general.
Over all, Citi's net income from continuing operations rose 3.6%, to $5.6 billion. That came to $1.11 a share, beating the analyst consensus estimate by 10 cents, according to Thomson Financial.
Net income for the corporate and investment banking unit rose 15%, to $1.9 billion, helped by record revenue in fixed income, equity, and investment banking, Citi said. The unit's revenue rose 21% over all, to $7.3 billion.
On the conference call, Mr. Prince told investors that each business unit's revenue is a better gauge than net income of where growth will be fastest.
For instance, the global wealth management unit took a "disproportionate share" of a $520 million after-tax charge for an anticipated accounting adjustment to deal with options expensing, Ms. Krawcheck said. As a result, the unit's net income fell 10%, to $287 million, despite a 14% revenue increase, to $2.48 billion.
Early in the conference call, Mr. Prince mentioned the Federal Reserve Bank of New York's April 3 letter lifting an order that had banned Citi from buying large banks.
But he reiterated what he said on April 4: that Citi plans to keep emphasizing organic growth. It will, however, "look at deals on a supplemental basis" to expand the franchise, he added.
Citi also announced Monday that its board had authorized a $10 billion share-buyback program.
Citi said its net interest margin - which is usually left out of its quarterly reports - was 2.86%. That was down 6 basis points from the end of the fourth quarter, wrote Andrew Collins, an analyst with Piper Jaffray & Co.
Jason M. Goldberg of Lehman Brothers Inc. wrote that he was "pleased" to see Citi "publish an average balance sheet for the first time." Its assets rose 6.2% from the end of the fourth quarter, deposits 6%, to $628.2 billion, and loans 3.7%, to $605.3 billion.
