NEW YORK (CNNMoney.com) -- Citigroup delivered its strongest results since the start of the financial crisis, as the banking giant reported a first-quarter profit of $4.4 billion Monday.
Earnings for the bank, one of the hardest hit institutions in the financial crisis, easily shattered Wall Street estimates. On a per share basis the company said it earned 15 cents. Analysts polled by Thomson Reuters expected the company to break even for the quarter.
Investors have been anxious for Citigroup to return to a sustained level of profitability after the bank endured billions of dollars in losses over the past two years. The latest results, Citi's biggest profit since the second quarter of 2007, suggest that it may have finally found its footing.
"Citi today is fundamentally a very different company from what it was only two years ago," Citigroup CEO Vikram Pandit said in a statement.
The company also made a point of disclosing it was not involved with last Friday's announcement by the Securities and Exchange Commission, which alleged that competitor Goldman Sachs defrauded investors in a sale of securities tied to subprime mortgages.
John Gerspach, Citigroup's chief financial officer, added that the company was cooperating with ongoing investigations being conducted by the SEC, but declined to comment further.
Citigroup's latest results were defined by two key trends: improving credit quality and a surge in trading activity.
The New York City-based bank said it experienced marked improvement in both its consumer and corporate loan portfolios provided a lift during the quarter. Moderating loan troubles across its U.S. residential mortgage business, for example, prompted the company to set aside less money for future loan losses.
"Things are getting better in terms of credit, not worse," said William Smith, president and senior portfolio manager at Smith Asset Management, whose firm owns shares of Citi. "Once things stabilize, hopefully [Citi] can reverse some of those loan-loss provisions."
Conditions also appeared to improve within the company's Citi Holdings division, which was created to house the firm's so-called "troubled assets" and businesses it has been looking to sell. Losses within the unit narrowed to $876 million from $2.5 billion in the fourth quarter of 2009.
But the biggest driver of Citi's results was its securities and banking division, particularly its bond trading business. Revenue from that unit more than doubled from the previous quarter to $5.4 billion.
Strong trading profits also helped Bank of America (BAC, Fortune 500) and JPMorgan Chase (JPM, Fortune 500) in the first quarter. Each enjoyed a bump in trading revenue that helped them deliver better-than-expected profits last week.
Executives at Citi cautioned though that those numbers were driven by a seasonal spike in activity and were unlikely to be repeated in the following quarters.
Pandit, who has been under scrutiny for his ability to lead the company, also warned that profits within the firm's other divisions were also susceptible.
The bank's consumer lending business, he noted, could suffer if Washington attempts to enact a severe new set of rules for Wall Street or if the recovery in the U.S. economy gets derailed.
"We are proud of our first quarter results but remain cautious about the environment, given the uncertain economic recovery and high unemployment in the U.S.," he said.
Citigroup must also contend with having the U.S. government as its largest shareholder. Taxpayers still own a 27% stake in the company, although the Treasury Department has said it planned to dispose of its remaining stake in the firm "as soon as possible."
Still, Citi's strong first quarter puts the company well on the way to reaching earnings projections offered last month by Pandit. During a company-sponsored conference in March, he told investors that he expected the company to soon be able to deliver profits of approximately $20 billion.
The numbers should also provide additional encouragement about the health of the nation's top banks. Of the big banks that have reported so far, all have delivered results that were far better than most industry analysts were anticipating.
Several other key banks are due to report this week, including Goldman Sachs (GS, Fortune 500) on Tuesday. Goldman is expected to report strong profits but that news is likely to be overshadowed by Friday's announcement from the SEC.