Citigroup Beats Expectations

Surprising, well, just about everybody, Citigroup (C) is claiming a net quarterly profit of $1.6 billion, marking the bank's first gain in six quarters. However, nary a report of the announcement lauds the news. The New York Times says that behind the seemingly impressive number is "some fuzzy math" and "creative accounting." One such "maneuver," referred to as a "credit value adjustment" and outlined by the paper, boosted the firm's bottom line by $2.7 billion.

The Wall Street Journal descibes other boons for the bank, which include areas that proved profitable for Citi's counterparts Goldman Sachs (GS) and JPMorgan (JPM), both of which reported better-than-expected earnings. Those areas include the trading desk in the bank's capital markets and the fixed group, which for the latter "received a boost from strong trading in interest rates and commodities." On the downside, the bank absorbed $7.3 billion in loan defaults and tucked away $2.7 billion to cover anticipated losses in the future. The Washington Post points out that Citigroup has received three capital injections from the government.

Looking forward, CNNMoney examines what might be Monday when Bank of America (BAC) presents its first-quarter earnings report. "Analysts are currently betting that BofA will swing back into the black ... after suffering a $1.79 billion loss last quarter," the article says. Thomson Reuters expects a profit of $615 million, or 5 cents a share. "[Bank of America] should theoretically have many of these same positive ingredients in its [first quarter] results," Nancy Bush, bank analyst and founder of NAB Research LLC, wrote in a letter to clients last week. "If not," she says, "look out."

The Labor Department released yesterday the newest unemployment stats, which according to the WSJ, showed California and North Carolina posting their highest jobless rates in at least three decades. California's unemployment rate leapt to 11.2 percent with North Carolina rising to 10.8 percent. "Unemployment increased in all but a handful of states during [March]," the paper said, citing the report. On the bright side, California's March losses were about half the 114,000 jobs shed the month prior, but still an irksome 62,100. Trailing California was Florida, which lost 51,900 jobs and Texas, which shed 47,100. North Carolina came in at 41,300. "Most economists expect job losses across all U.S. non-farm employers to continue in April at or near the rapid pace seen in March, when 663,000 jobs disappeared," the story says.

The Financial Times reports that "rising unemployment is prompting U.S. authorities to consider taking a tougher stance in judging the results of bank stress tests," which could  "ultimately force leading financial groups to hold more capital." The stress tests, which were put in place to gauge whether banks had enough resources to make it through a worse-than-expected recession, aka an "adverse scenario," operate under certain assumptions that may no longer be relevant as unemployment rates worsen. The FT explains: "When the stress tests were revealed two months ago, the authorities defined the adverse scenario as one in which unemployment rose gradually to peak at 10.4 per cent in late 2010. But, since the announcement was made, unemployment has risen much more quickly than was expected, even under the ‘adverse scenario.' " Some analysts are saying that it is much more likely than before that the United States will reach that rate.

Bloomberg takes a look at other issues arising from the stress tests: how public should the "grades" be? According to the site, the U.S. Treasury and certain financial regulators are butting heads over how to disclose the results and how public they should be, a little detail that seems to have been overlooked in the formulation of the program. And whatever the decision may be, it needs to happen fast. The deadlie is May 4. The site reports that on team "Keep It Quiet" is the Office of the Comptroller of the Currency and other regulators. The Treasury, on the other hand, is gunning for broader disclosure.

The pay-to-play scheme surrounding New York state's government-run pension plan gets some attention on the front page of the NYT, which offers a less news-oriented take on the story and more of a here's-what-you-need-to-know-if-you-haven't-read-the-paper-for-a-week approach. The alleged scandal has recently led to probes of the involved asset management firms (one of which was founded by the Obama administration's auto czar, Steve Rattner) and also piques the interest of the WSJ and Bloomberg. The paper and site report that yesterday, White House press secretary Robert Gibbs defended Rattner to reporters traveling with the president. "He's not accused of doing any wrongdoing," Gibbs said. "And he's not likely to face any criminal or civil charges as it relates to this."

The WP offers the inside scoop on how Rattner shocked bank executives during a discussion earlier this month. "To save Chrysler, he told them, the four banks and several other financial firms would have to surrender their claims to most of the $7 billion the automaker owed them. And what would the banks get in return for this sacrifice? Nothing."