Profits at Citigroup rose 9% to $2.36 billion in the first quarter, hoisted by healthy gains in its mammoth consumer business and by the market's unexpected comeback.

The nation's largest banking company posted earnings per share of $1.01, a solid 14 cents above Wall Street estimates.

Citigroup co-chairman John Reed credited favorable economic conditions and the company's cross-selling and expense savings initiatives for the strong showing. The combination produced results that were "gangbusters," he said.

"We are seeing good business conditions across a strong franchise," Mr. Reed added.

Several other major banking companies also reported gains Monday.

BankAmerica Corp., ranked No. 2 by assets, notched a 44% jump in net income, to $1.9 billion. But excluding special charges in last year's first quarter, the Charlotte, N.C., company suffered a 3% drop.

At No. 17 Bank of New York Co., gains in securities processing, brokerage services, and trust pushed profits up 12%, to $316 million. And earnings at Mercantile Bancorp of St. Louis, the 25th-largest U.S. banking company, rose 3%, to $118 million.

"To date, the numbers that have come in have been solid," said Frank Barkocy, an analyst at Keefe Managers. "We saw pretty decent loan demand for the industry and margins that are well maintained to modestly better.

"On the fee side, trading income was strong for many, and the trend was double-digit growth, with fees a much larger part of total revenues," Mr. Barkocy added.

Results at $690 billion-asset Citigroup included a $74 million restructuring charge. Without the charge, earnings were $1.04 a share.

Total revenues grew 11%, to $14.6 billion. Noninterest revenues likewise rose 11%, to $9.2 billion.

The company said it has already achieved $900 million of the $2 billion of merger-related savings it initially targeted.

Analysts said the bank exhibited revenue growth across its major business lines but questioned whether Citigroup and other money-center banks can sustain high profits from trading activities.

"They had a very strong quarter," said Ronald Mandle, an analyst at Sanford C. Bernstein & Co. "But it would be hard to match the first quarter through the rest of the year."

Mr. Reed said the quarter's performance has prompted senior management to revise internal growth targets for the remainder of the year.

Consumer banking led the revenue momentum, as it did in the two previous quarters, Mr. Reed said. Revenues from global consumer banking activities rose 21%, to $7.1 billion, and profits from the business rose 33%, to $1 billion.

Credit card revenues increased 40%, to $1.98 billion, and profits grew 75%, to $268 million, the company said. Card receivables grew 48%, mainly from the acquisition of AT&T Corp.'s Universal Card Services business last year.

Revenues at Commercial Credit Co., Citigroup's consumer finance unit, rose 22%, to $376 million, and its profits rose 37%, to $81 million, helped by the cross-sales of products through Citigroup's Primerica Financial Services unit.

"Cross-selling is alive and well," said Stephen Biggar, an analyst at S&P Equity Research. "They seemed to have gotten more of a head start on that than most people thought."

Branch banking reported a 7% gain in revenues, to $521 million, but a 200% gain in profits, to $75 million, as a result of cost-cutting, the company said.

Mr. Reed said the company plans to expand consumer-oriented operations, particularly credit cards, mutual funds, asset management, and private banking. Acquisitions in these areas would be considered, he said.

On the corporate banking side, Mr. Reed said expansion was not necessarily a goal. "Our (corporate) businesses are pretty well targeted," Mr. Reed said. "We are not looking to expand the customer base significantly."

Stable worldwide financial markets helped Citi's corporate and investment banking activities improve markedly from the same period last year. "What moved the dial this quarter was the trading environment," said David Berry, research director at Keefe, Bruyette & Woods Inc.

Revenues from corporate and investment banking rose 10%, to $7 billion, and profits from the business grew 31%, to $1.35 billion, the company said.

The turnaround was most dramatic at Salomon Smith Barney. Revenues at the investment bank jumped 14%, to $3.3 billion, and profits rose 46%, to $648 million.

The company said Salomon reported record levels of fixed income underwriting during the quarter. The investment bank posted a 13% gain in commissions, to $900 million, and a 6% increase in investment banking revenues, to $655 million, driven by the record volume.

Asset management fees at Salomon rose 26%, to $377 million. The unit counted client assets of $816 million at the end of the quarter, up 16% from the same period last year.

Global relationship banking reported a revenue gain of 10%, to $1 billion, and a profit increase of 25%, to $197 million. Corporate banking in emerging markets also rebounded, with revenues up 18%, to $1.1 billion, and profits up 22%, to $321 million.

SSB Citi Asset Management Group, a separate unit, recorded revenue growth of 16%, to $354 million, and income growth of 16%, to $80 million. Assets under management grew 20% over last year, to $338 billion.

Cross-selling for the asset management business was also strong, the bank said. Sales of Citigroup's own mutual funds through Primerica totaled $408 million and made up 64% of all the mutual funds sold by the unit during the quarter, the bank said.

Profits from insurance operations also rose. Travelers Life and Annuity Co. recorded income gains of 20%, to $147 million, on double-digit growth in annuity account balances and strong cross-selling, the bank said.

Citigroup's expenses rose 8.6%, to $7.3 billion, reflecting in part hefty bonuses for corporate and investment bankers.

The company's shares closed Monday's trading at $70.625, down $1.

BankAmerica Corp.

BankAmerica, with $614 billion of assets, said lower expenses, strong trading results, and loan growth were offset by a decline in noninterest income, particularly investment banking revenue.

Noninterest income slipped 8%, to $3.22 billion. The company said securities gains of $130 million were substantially lower than the $213 million of a year earlier. Investment banking income was off 37%, to $388 million, but trading account profits rose 34%, to $500 million.

Net interest income was flat at $4.65 billion. The provision for credit losses of $510 million was also unchanged.

Noninterest expense was $4.5 billion, down 5% from a year earlier. The company said cost reductions were related to mergers but added that expense savings were offset somewhat by spending on transition projects associated with last year's merger of BankAmerica and NationsBank Corp.

"We thought results were quite good for this quarter and provide us with excellent momentum for the rest of '99," chief financial officer James H. Hance Jr. told analysts at a New York conference Monday.

"Loan growth has been huge, activity has been huge," said Mr. Hance. "What we've seen is a lower interest rate environment and greater competition. We've offset that with volume and greater activity."

Mr. Hance said the company is on track to cut $1 billion in expenses from the BankAmerica-NationsBank merger and $550 million of costs from the acquisition of Barnett Banks Inc. of Jacksonville, Fla.

Mr. Hance also said the company wouldn't consider acquisitions until after the BankAmerica-NationsBank merger is integrated next year. "We really are not focused on acquisitions. We are focused on what is a large and lengthy transition process. That's the biggest payoff," he said.

"All around, it was a very solid performance, highlighted by very strong trading revenues," said Joseph Morford, an analyst with First Security Van Kasper in San Francisco.

"Revenues grew with or without investment banking, and that's a good thing," said Henry Dickson, an analyst with Salomon Smith Barney. "The new company, in a seasonally weaker quarter, had good revenue growth."

The biggest earnings disappointment, Mr. Hance said, was lower advisory fees in investment banking. Mr. Hance attributed that to the turnover of management and personnel at its investment unit, Montgomery Securities in San Francisco. It was also affected by the sale last year of investment firm Robertson, Stephens & Co. of San Francisco.

Foreign trading, a business BankAmerica is reevaluating as part of a broader overhaul of international banking, contributed to the upside surprise in earnings.

Mr. Hance said BankAmerica continues to reduce its exposure in troubled countries. Exposure in Asia, for instance, was down by $2 billion of assets, or 9%, from Dec. 31, he said.

"I want to underline (that) we want to reduce the risk while expanding and increasing more customer-related businesses," Mr. Hance said.

"It is not an exit strategy, it is a refinement strategy," Mr. Hance added. He noted the company just completed a six-month study of its international banking business.

Mr. Morford said the company beat estimates primarily because of the strength of the trading revenues. He said the company "admits that is unsustainably high, but it's encouraging nonetheless."

BankAmerica's stock closed Monday at $71.75, down $1.25.

Bank of New York

Earnings per share of 41 cents at Bank of New York met Wall Street expectations.

The $64.9 billion-asset banking company said its results benefited from continuing investments in securities processing, brokerage services, and trust, as well as from expense controls.

Noninterest income rose 13% over the same period last year, to $625 million. Last year's fee income included a $29 million gain on the sale of the bank's historic headquarters at 48 Wall St.

Bank of New York has continued to reap gains from its specialty of servicing institutional investors. Fee income made up almost 60% of total revenues, the bank said.

Fees from securities processing rose 27%, to $291 million. Trust and investment management fees jumped 16%, to $58 million.

Foreign exchange and other trading revenues dipped 8.6%, to $42 million, amid slack demand, the company said.

Expenses of $509 million were flat over last year.

Shares of Bank of New York closed Monday at $37.6875, up 12.5 cents.

Mercantile Bancorp

The $35.6 billion-asset Mercantile said it benefited from commercial loan growth and cost control.

Mercantile said commercial loans of $6.5 billion were up 21% from a year earlier. Net interest income was $284 million, up 4%.

Noninterest income was $225 million, down 8%. Excluding one-time and securities gains, noninterest income rose about 9%.

The company had one-time gains of $23 million in the year-earlier quarter from the sale of its mortgage servicing business and $5 million in gains from the sale of its corporate trust and a portion of its credit card business.

Noninterest expense was $225 million, up 2% from a year earlier. Net loan chargeoffs in the quarter were $7.3 million, up 5%.

"They did a very good job with expenses, and credit quality is excellent," said Gerry Cronin, an analyst with McDonald Investments Inc. "The issue continues to be revenues or the lack thereof. I think that's the challenge."

Mercantile is in the midst of a cost-cutting effort, which includes eliminating 1,300 jobs, or 11% of its work force. The company hopes the effort will generate up to $25 million in additional earnings in 1999. The company said Monday that it has eliminated 680 of the jobs, and the remainder would gone by yearend.

"Expense side is a short-term issue," Mr. Cronin said. "The long-term issue is revenues."

"The key for them going forward is the ability to manage the revenue and expense growth gap," said William R. Katz, an analyst with Merrill Lynch & Co.

John W. McClure, Mercantile's chief financial officer, said the company is focused on revenue growth, which he said is a major part of the restructuring program announced last quarter. He said the company would spend up to $30 million for a new teller computer system to be installed late this year.

The program "has a heavy emphasis on revenue growth, and we think the area with the heaviest opportunity is on the retail side," Mr. McClure said.

"We will see continued improvement in revenue growth in the last part of this year in addition to the year 2000."

Mercantile's stock closed Monday at $49.75, up 31.25 cents. +++

Mercantile Bancorp

St. Louis, Mo.

Dollar amounts in millions (except per share)

First Quarter 1Q99 1Q98

Net income $118.037 $114.859

Per share 0.74 0.75

ROA 1.33% 1.35%

ROE 15.20% 16.03%

Net interest margin 3.61% 3.62%

Net interest income 276.8 264.2

Noninterest income 126.4 137.0

Noninterest expense 225.4 220.5

Loss provision 7.4 8.5

Net chargeoffs (7.3) (7.0)

Balance Sheet 3/31/99 3/31/98

Assets $35,579 $35,149

Deposits 24,722 25,233

Loans 22,477 21,763

Reserve/nonp. loans 2.85% 2.81%

Nonperf. loans/loans 0.48% 0.48%

Nonperf. assets/assets 0.49% 0.59%

Nonperf. assets/loans + OREO 0.55% 0.59%

Leverage cap. ratio 7.28% 6.60%

Tier 1 cap. ratio 9.78% 9.20%

Tier 1+2 cap. ratio 12.33% 12.11%

Citigroup

New York

Dollar amounts in millions (except per share)

First Quarter 1Q99 1Q98

Net income $2,362 $2,161

Per share 1.01 0.90

ROA NA NA

ROE 23.0% 22.0%

Net interest margin NA NA

Net interest income 4,851 4,490

Noninterest income 9,219 8,306

Noninterest expense 7,321 6,739

Loss provision 2,777 2,589

Net chargeoffs NA NA

Balance Sheet 3/31/99 3/31/98

Assets $6,895* $7,388*

Deposits NA NA

Loans NA NA

Reserve/nonp. loans 172% 184%

Nonperf. loans/loans NA NA

Nonperf. assets/assets 0.7% 0.6%

Nonperf. assets/loans + OREO NA NA

Leverage cap. ratio 6.2%* 5.67%

Tier 1 cap. ratio 8.8%* 8.38%

Tier 1+2 cap. ratio 11.5%* 10.97%

Bank of New York

New York

Dollar amounts in millions (except per share)

First Quarter 1Q99 1Q98

Net income $316.0 $284.0

Per share 0.41 0.36

ROA 1.94% 1.93%

ROE 24.48% 24.99%

Net interest margin 3.18% 3.20%

Net interest income 436.0 451.0

Noninterest income 625.0 597.0

Noninterest expense 509.0 467.0

Loss provision 15.0 5.0

Net chargeoffs 19.0 5.0

Balance Sheet 3/31/99 3/31/98

Assets $64,913.0 $63,503.0

Deposits 44,838.0 44,632.0

Loans 39,114.0 37,750.0

Reserve/nonp. loans 3.04% 3.47%

Nonperf. loans/loans 0.5% 0.5%

Nonperf. assets/assets 0.3% 0.3%

Nonperf. assets/loans + OREO 0.5% 0.5%

Leverage cap. ratio 7.68% 7.33%

Tier 1 cap. ratio 7.87% 7.25%

Tier 1+2 cap. ratio 11.91% 11.43%

BankAmerica Corp.

Charlotte, N.C.

Dollar amounts in millions (except per share)

First Quarter 1Q99 1Q98

Net income $1,914.0 $1,331.0

Per share 1.08 0.75

ROA 1.27% 0.93%

ROE 16.78% 12.46%

Net interest margin 3.58% 3.81%

Net interest income 4,645 4,659

Noninterest income 3,353 3,706

Noninterest expense 4,453 4,704

Loss provision 510 510

Net chargeoffs 519 516

Balance Sheet 3/31/99 3/31/98

Assets $614,245 $580,211

Deposits 343,317 344,447

Loans 363,102 341,219

Reserve/nonp. loans 2.51% 2.79%

Nonperf. loans/loans 0.78% 0.71%

Nonperf. assets/assets 0.51% 0.46%

Nonperf. assets/loans + OREO 0.86% 0.79%

Leverage cap. ratio 6.47% 5.64%

Tier 1 cap. ratio 7.40% 6.80%

Tier 1+2 cap. ratio 11.17% 11.19% ===

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