Investment banking arm bolsters Citigroup bottom line

US banking giant Citigroup beat earnings expectations as net income surged 30 per cent in the first quarter. But beneath the banner results, it is grappling with a sluggish economy.

The bank, which has been aggressively working to slash costs and slog through a glut of soured assets, reported a profit of $US3.8 billion ($3.64 billion) for the first quarter. Revenue rose 3 per cent to $US20.5 billion.

Citigroup's results were dampened by largely stagnant revenue growth in its consumer banking business and persistent difficulties in Asia and Latin America.

One major problem for Citi is that US consumers are still unwilling to take on new loans, even with interest rates hovering at near-record lows.

"I don't think we've got a real strong consumer driving the economy," said John Gerspach, the bank's chief financial officer. "We are seeing a certain amount of deleveraging."

Across the nation, banking analysts say, consumers are working to pay off bills and stay out of debt. Such a tepid appetite for loans underpinned Citigroup's results. While total loans inched up slightly in the first quarter to $US539 billion, the bulk of the growth stemmed from demand among corporate clients beyond the US. In North America, revenue in the global banking unit stagnated, falling 1 per cent to $US5.1 billion.

"The environment remains challenging and we are sure to be tested as we go through the year," Citigroup chief executive Michael Corbat said.

The earnings result underscores broader challenges buffeting the US banking industry. On Friday, JPMorgan Chase and Wells Fargo reported declines in revenue, slowed in part by mortgage businesses that are beginning to sputter. The refinancing boom, fed by federal largesse that drove down interest rates and spurred a flurry of refinancings, is showing signs of petering out.

JPMorgan chief executive Jamie Dimon called loan growth "soft" for the quarter.

Other indicators of economic health have proved dispiriting as well. Retail sales in the US fell 0.4 per cent in March. Even though unemployment is falling, consumers remain unconvinced.

Part of the wariness arises from scepticism about the housing market. Even though prices have been rising recently, the improvements will not rouse consumers until they remain steadily high for a longer stretch, analysts say.

Citigroup has pinned some of its hope for future profitability on its vast international footprint, but some regions produced lacklustre returns. Revenue from consumer banking in Asia fell in the first quarter to $US2 billion, down 1 per cent.

The bank is struggling to navigate the shifting regulatory landscape in Asia. In South Korea, for example, officials placed a cap on the interest rates of a range of consumer loans.

One bright spot for Citigroup in the first quarter was the securities business, bolstered by strong gains in investment banking, fixed income and equities. Revenue in that unit surged 31 per cent to $US6.98 billion, while net income was $US2.3 billion, up 81 per cent from the period a year earlier. Much of the gains came from Citigroup's investment banking unit, which was buoyed by increases in debt and equity underwriting.