NEW YORK (CNNMoney.com) -- Citigroup surprised Wall Street Friday as the company delivered its first profit in more than a year, helped by strength within its investment banking division.
The company reported net income of $1.6 billion during the first quarter, up from a loss of $5.1 billion a year ago.
Yet, after taking into account the conversion price of a $12.5 billion preferred share offering from January 2008, and $1.22 billion in preferred stock dividend payments to the U.S. government among others, Citigroup reported a loss of $966 million, or 18 cents a share.
Even after including those special items, Citigroup still fared better than many on Wall Street were anticipating. Analysts were forecasting a loss of $1.39 billion, or 34 cents a share.
Since the credit markets began to unravel in late 2007, the company has posted net losses of more than $28 billion. That led the government to take a $45 billion stake in Citigroup in the form of preferred shares and warrants to help stabilize the bank.
Citigroup CEO Vikram Pandit said he was "pleased" with the firm's performance this quarter, but those remarks were tempered by a cautious outlook.
"While we and the industry face challenges in the coming quarters as we work through the weak economy, we will remain focused on strengthening the Citi franchise," he said in a statement.
Shares of Citigroup (C, Fortune 500), which have soared in recent weeks along with the rest of the banking sector, were nearly 10% higher in pre-market trading Friday.
The company said it benefited this quarter from expense cuts and a $704 million after-tax gain related to its sale of its stake in Brazilian credit card company Redecard.
But much of the bank's profit was driven by big numbers in its institutional clients group, which houses its investment banking and trading businesses.
After reporting a steep loss just a quarter ago, the division reported net income of $2.8 billion, helped by strong fixed-income trading results.
Nevertheless, Citigroup continued to have problems across a number of its consumer-related loan portfolios as unemployment climbed higher.
Net credit losses in the company's North American credit card division rose 81% from a year ago. The bank's total credit costs were $10.3 billion during the quarter, up 76% from a year ago.
Citi also delivered an update Friday about the government's planned conversion of up to $25 billion in preferred shares to common stock, which was announced in late February in an effort to improve Citi's capital base.
The bank said the proposed exchange would not take place until after the government completes its stress test program of the nation's 19 largest banks, which includes Citigroup. Results of those tests are expected to be released in early May.
Citi's earnings surprise is the latest bit of positive news from large banks. Over the past week, JPMorgan Chase (JPM, Fortune 500), Wells Fargo (WFC, Fortune 500) and investment bank Goldman Sachs (GS, Fortune 500) all reported better-than-expected profits during the first three months of the year.
Bank of America (BAC, Fortune 500) is the next big bank due to report its first quarter results. It is scheduled to release them on Monday.Link: http://money.cnn.com/2009/04/17/news/companies/citigroup/index.htm?postversion=2009041707
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