CITIGROUP AND General Electric (GE), two of the biggest corporate victims of the economic crisis, yesterday won some respite by reporting better-than-expected profits in the first three months of the year.
However, the corporate giants failed to dispel market fears over their future at a time when the global economy and US consumer sector remain under severe strain.
Citi heightened the uncertainty over the US government’s stress tests of banks’ financial health by announcing a delay in the planned sale of a 36 per cent stake to the authorities until the results of the tests next month. Some investors read it as a sign that the company might need another bailout.
Although GE is in better financial health than Citi, both com-panies were dogged by questions over their earnings, which were helped by one-off gains, and their ability to withstand further shocks to the global economy.
In spite of reporting its first profit in six quarters – net income of $1.6 billion (€1.23 billion) – analysts questioned Citi’s results, highlighting the one-off gains that helped it to offset $5.4 billion in credit-related writedowns.
Citi executives pointed to the strength of its investment bank, which had a stellar quarter driven by strong trading revenues, and said the company was on track to reduce costs and risk.
At GE, earnings from continuing operations fell 35 per cent to $2.8 billion, or 26 US cents a share, but were ahead of expectations. The company reassured investors that GE Capital, its financial arm, would remain profitable this year in spite of an uncertain outlook for the credit markets. – Copyright The Financial Times Limited 2009
