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Citigroup Surpasses Expectations

October 17, 2000

Buoyed by strong growth in consumer operations as well as investment banking and brokerage, earnings at Citigroup Inc. rose in the third quarter to exceed Wall Street expectations. Bank One Corp., still reeling from problems with its credit unit and poor commercial loans, met reduced expectations despite a 37 percent drop in profits.

Citigroup Inc.

Citigroup, the nation’s largest banking company by assets, said Tuesday that net income in the July-September period totaled $3.09 billion, or 67 cents a share, up from $2.44 billion, or 52 cents a share, a year earlier. Analysts surveyed by First Call/Thomson Financial had expected earnings of 65 cents a share.

In midmorning trading, shares in the New York-headquartered bank dipped 12.5 cents to $50.688 on the New York Stock Exchange.

The report came a day after Citigroup rival, Bank of America Corp. in Charlotte, N.C., said its net earnings dropped 15 percent in the third quarter, hurt by higher interest rates and a hefty restructuring charge. Still, Bank of America beat analysts’ expectations. Bank of America is No. 2 in the nation by assets.

George A. Bicher, an analyst at Deutsche Banc Alex. Brown in New York, described Citigroup’s performance as very strong.

``What was impressive was that they had nice performance from a broad group of business units, both consumer and commercial,″ Bicher said. And unlike other big banks, which have had to increase loan reserves, the nonperforming assets at Citigroup declined, he noted.

Bicher also pointed out that Salomon Smith Barney, Citigroup’s brokerage unit, reported a 44 percent increase in income to $622 million in the third quarter from $432 million a year earlier despite its heavy underwriting of telecommunications companies, which were badly hurt in the recent market nosedive.

Citigroup chairman and chief executive Sanford I. Weill said in a statement accompanying the earnings report that the strong performance reflected the banks diversification and global reach.

``We are creating greater efficiencies within our company, extending our capabilities on the internet and strengthening our balance sheet,″ Weill added. ``We continue to invest our substantial capital to expand our leadership in key areas, enhance our long-term growth and build our base of stable, recurring earnings.″

For the first nine months of the year, net income was $9.68 billion, or $2.09 a share, compared with $7.25 billion, or $1.55 a share in 1999.

Bank One Corp.

Bank One Corp., the nation’s fourth largest bank, reported its fourth straight quarterly decline. Third-quarter net income was $581 million, or 50 cents a share, compared with $925 million, or 79 cents a share, a year earlier. The earnings met the estimate of analysts surveyed by First Call/Thomson Financial.

Bank One chief executive James Dimon, the former Citigroup Inc. president who took over at the troubled Chicago banking company in March, called the earnings performance not acceptable. But he said Bank One remains on target to reach its goal for the second half of this year and for 2001.

While Dimon said he was ``comfortable that we are making progress on initiatives announced in July″ _ including strengthening the balance sheet and investing more in infrastructure and customer service _ he said increases in nonperforming loans had prompted the company to raise its loan loss reserve.

Lori Appelbaum, an analyst for Goldman, Sachs and Co., said the poor record on commercial loans made for another sour quarter.

``The warning flags have been out there on this company,″ she said. ``They have been alerting people to the fact that they had a lot of junk in the portfolio, and here it is.″

Bank One’s shares fell 87.5 cents to $33.75 on the New York Stock Exchange. Still, they remained well above the 52-week low of $23.19 hit last February, a month before Dimon took over, but far below the $55.62 it was trading at when the credit problems first surfaced 14 months ago.

The bank has been struggling since the disclosure in August 1999 that strong growth in First USA, the country’s No. 2 credit-card issuer, had slowed after a series of flawed marketing strategies drove away customers. Besides carving deeply into its earnings, the mistakes caused Bank One’s stock to plummet.

Bank One posted a net loss of $8 million, or 1 cent per share, for the first nine months of 2000 compared with a net gain of $3.068 billion, or $2.58 a share, for the same period of 1999. Excluding the impact of preferred dividends, the company had net income of $1 million through September.

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