By David Henry and Anil D'Silva
(Reuters) - Citigroup Inc (N:C) reported its highest quarterly profit in nearly eight years as costs plunged, showing that the bank's efforts to streamline its business are beginning to pay off.
Citi has been slowly getting its house in order by cutting costs and simplifying its structure. The bank has been selling retail operations in a number of countries, shrinking its U.S. branch network and getting rid of non-core businesses.
Citi's operating expenses fell 10 percent to $10.88 billion in the first quarter ended March 31 as it spent less on employee compensation and advertising and marketing.
Legal and restructuring costs plunged to $403 million from $1.16 billion.
Shares of the third biggest U.S. bank by assets rose 1.5 percent to $54 in early trading on Thursday.
Revenue from investment banking, which is part of Citi's institutional clients group, rose 14 percent to about $1.20 billion.
However, overall revenue in the institutional clients group fell 1 percent to $9.03 billion, dragged down by fixed income trading. Revenue in its global consumer banking business fell 2 percent to $8.66 billion.
"While some businesses faced revenue headwinds, we grew loans and deposits in our core businesses and gained wallet share among our target clients," Chief Executive Mike Corbat said in a statement.
The bank has exited or is exiting consumer businesses in countries including Japan, Turkey, Czech Republic and Hungary.
Corbat aims to use Citi's streamlined structure to return more capital to shareholders. He made progress toward that goal in March when the Federal Reserve approved his plans to raise dividends and buy back shares.
Citi's return on assets was 1.05 percent, higher than Corbat's target of at least 0.9 percent for the year.
The bank's tier-1 common equity capital ratio rose to 11 percent from 10.6 percent in the fourth quarter as it used $1.2 billion of deferred tax assets.
Citi put a lot of legal and restructuring costs behind it in the fourth quarter, recording charges of $3.5 billion.
Adjusted net income rose 16 percent to $4.82 billion, or $1.52 per share, in the first quarter, beating average analyst estimate of $1.39 per share, according to Thomson Reuters I/B/E/S.
Adjusted revenue fell 2 percent to $19.81 billion.
Fixed income trading revenue fell 11 percent to $3.48 billion. In contrast, Goldman Sachs Group Inc (N:GS) and JPMorgan Chase & Co (N:JPM) reported higher revenue from fixed income trading.