Citigroup shrugs off scandals to earn $17bn

Citigroup's chief executive, Charles Prince, said yesterday that he hoped 2005 would present "no more headaches" as the scandal-hit banking group reported a record $5.3bn (£2.8bn) in fourth-quarter profits, on the back of growing consumer and investment banking business.

In the full year, Citigroup, the world's largest financial services company, reported earnings of $17.05bn, down from $17.85bn.

Citigroup was closely linked to some of the worst financial scandals of recent years - including WorldCom, the biggest bankruptcy ever - and the figures included a $4.95bn charge for various settlements. Last May, the bank agreed to pay $2.65bn to settle a class-action suit by investors who bought WorldCom securities before it crashed.

Mr Prince, who has said he intends to restore Citigroup's reputation, described the legal and regulatory issues facing the company in 2004 as "significant disappointments". He said it was a "key priority for this management team to take these open issues off the table".

The bank also took a $244m charge over the recent closure of its Japan Private Bank amid allegations that it lacked safeguards against money laundering and misled customers over risks.

The US banking sector is being bolstered by Americans' willingness to take on further debt as well as by the recovery of the corporate sector. Citigroup's revenues in the fourth quarter rose 9% to $21.9bn.

Profits from the consumer division were up 7% at $3.1bn. Credit card income grew 27% to $1.4bn; retail banking rose 7% to $1.1bn and consumer finance jumped 22% to $584m.

The recovery on Wall Street that gathered pace in the second half of last year was also evident in Citigroup's results. Profits at the corporate and investment bank rose 32% to $1.7bn. International earnings grew 25% to $1.8bn, driven partly by a gain of 56% in Asia.

Sallie Krawcheck, the chief financial officer, added a note of caution, warning that she was "more comfortable" with the lower forecasts by analysts for 2005. She cited higher tax liabilities and a "tightening" of interest rates as reasons.