Pandit's plans pay off as Citigroup returns to profit - and cuts bonuses

Banking giant Citigroup has returned to the black after posting net income of $10.6 billion (£6.6bn) for 2010 and announcing a 2 per cent cut in pay and bonuses for the year.

• Vikram Pandit's campaign of asset sales and staff cuts - as well as refocusing the business - has seen Citigroup return to a healthy financial condition. Picture: AP

Citi is the second big US bank to declare figures which will be scrutinised in Britain ahead of the UK bank bonus payments to be announced next month.

Its revenues for the final quarter of 2010 were down 6 per cent on the previous three months, and the earnings came in under analysts' expectations.

Citi's reported net profit of $1.3bn for the fourth quarter came as it released $2.3bn in reserves for bad loans.

Shares in Citigroup, which had rallied strongly over the past year, were down significantly in US morning trading.

A slump in Citigroup's securities and trading unit hurt revenues, which fell to $18.4bn on a managed basis.

Citi, which owns credit card brand Egg and employs 11,000 staff in the UK, said it had set aside $24.43bn for pay and bonuses for its 260,000 staff worldwide, down 2 per cent compared to the previous year.

During the financial crisis, Citi sought a $45bn bail-out from the US government, but the US treasury has now completed the sale of its stock in the company. The bank posted a net loss of $1.6bn in 2009.

Vikram Pandit, chief executive, said 2010 was a year "full of milestones" and was critical for the turnaround of the institution. "Our goal was to achieve consistent profitability and I am very pleased that, with our fourth consecutive profitable quarter, we earned $10.6bn for the year," he said.

"Our core businesses in Citicorp, with its deep roots in both the developed and emerging markets, performed well throughout the year while we made targeted investments in talent and technology."

"At the same time, we continued to wind down Citi Holdings in an economically rational manner, reducing assets by $128bn in 2010 alone. Holdings' total assets have declined by more than half from their peak in 2008 to $359bn and now stand at less than 20 per cent of our balance sheet."

Pandit, who took the reins at Citigroup in December 2007 as the bank was taking big writedowns linked to subprime mortgages, has sold assets, laid off staff and tried to focus Citigroup on its main businesses, including investment banking and retail banking for affluent customers globally.

Citigroup owns 49 per cent of brokerage giant Morgan Stanley Smith Barney, and yesterday revealed it probably suffered a fourth-quarter loss.Citi said its brokerage and asset management holdings - virtually all of which is the Morgan Stanley venture - had a net loss of $52m.

The results follow better-than-expected figures from rival JP Morgan last week, which reported full-year net income of $17.4bn for 2010. Other big banks reporting this week include Goldman Sachs today, and Bank of America on Friday. Morgan Stanley reports tomorrow.

UK employees will not learn details of their bonuses until a few days later.