Pandit's payrise

As reported earlier Citibank/corp/group Vikram Pandit (should we call him CitiCEO) said he wouldn’t take home more than $1 per annum until the bank was profitable again, and lo! it was done!

Today Citigroup reported its first profit in six quarters, claiming like its rivals that it is benefiting from “a rise in trading activity” The world economy is in total meltdown and somehow the major banks seem to be able to trade proitably and with higher volumes? That does not really make sense..The US bank announced today it made a net profit of $1.6bn compared with a net loss of $5.1bn a year earlier, marking its highest earnings since the second quarter of 2007. Revenue doubled to $25bn amid a boom in trading fixed income and equities.

Then we come to the reason: writedowns of toxic assets were a fraction of last year’s in part because of a change in fair-value accounting rules. The Financial Accounting Standards Board voted earlier this month to allow banks more freedom to use their own valuation models, rather than current market prices, for assets where markets have become illiquid. A second rule change means banks will only have to recognise a part of any impairment in their profits.

Not only does this mean that the banks will have been able to write back some earlier provisions based on fair market valuations, it also means when some pesky auditor comes to ask some difficult questions about some nebulous paper last traded or offered way below book value they can .. “La, la, la! I’ve got my fingers in my ears I can’t hear you. La, la, la!”