Psst: Citi Turned a Profit — Is that Really Cause for a Rally?

Everytime I’m out on Mom-patrol the markets rally like it’s 2005.  Citi, whose stock price looks as if it never sleeps, let it slip that it was profitable in the first two months of 2009. In response, the markets surged 5.8% Tuesday; Citi surged to $1.45 from $1.02/share. The markets must have been looking for a reason to rally because I would like to know how the bank couldn’t have turned a profit: It can borrow money practically for free and then can charge a great deal to borrowers.

John Crudele in The New York Post sums up the skepticism that many feel about the leak from Citi’s fearless leader, Vikram Pandit:

… a couple of things trouble me.

First off, if Citi is suddenly profitable, I assume it won’t be needing any more bailout money from me and other taxpayers.

Second, if what Pandit is saying is correct why didn’t he make the news public in the traditional way so that Citi employees who got his memo couldn’t, ya’ know, engage in illegal insider trading?

Third, exactly what the hell is Pandit talking about?

Is the profit that Citi allegedly has on an operating basis – meaning that it comes from day-to-day business?

Surely it can’t include extraordinary items like all those nasty, worthless loans we’ve been hearing so much about.

Since Washington is lending money to Citi at virtually no inter est rate, and the bank is turn ing around and giving out loans at still fairly healthy rates, it isn’t really a sur prise that even Pandit can make money.

On the surface, Citi may be fine, but what’s underneath?

The Wall Street analysts who follow Citi still expect it to report a loss of $2.8 billion in the first quarter and a $5.7 billion loss for the full year.

Citi is expected to report results around April 21, so we’ll see whether Pandit can justify what was unofficially leaked yesterday.

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