Citi beats doomsday scenario

Citi (C) posted a steep first-quarter loss, but shares rose in early action Friday as the results were substantially better than the worst-case scenarios that had been drawn up on Wall Street. Citi lost $5.1 billion, or $1.02 a share, for the quarter ended March 31, reflecting $12 billion in writedowns on mortgage-related securities and leveraged buyout loans, among other things. While that’s a big writedown, it wasn’t as big as some forecasters had expected: The range of projected writedowns ranged as high $18 billion at Merrill Lynch, which had forecast a loss of $1.66 a share.

Citi said revenue fell 48% from a year ago, reflecting the writedowns, while the bank also posted a $3.1 billion increase in credit costs in its global consumer segment. And like Merrill Lynch (MER) yesterday, Citi reported that it took a downward credit value adjustment related to exposure to monoline insurers. The near collapse of several smaller monolines has rendered some hedging strategies involving them useless, a trend that cost Citi $1.5 billion.

Still, even with huge swaths of its balance sheet under water, Citi continues to show some earnings power. Transaction services revenue rose 42% from a year ago to a record, while Smith Barney revenue rose 18%. “Despite the negative factors in the broader markets, we continue to see strong momentum throughout the organization with robust volumes in many of our products and regions,” said CEO Vikram Pandit. Shares rose 7% in pre-market trading.