Citi CEO Vikram Pandit says "Pigs can fly"

So, Vikram Pandit said today that his bank is having the best quarter since 2007, when it last posted a profit.

“I am most encouraged with the strength of our business so far in 2009,” Pandit wrote in an internal memorandum obtained today by Bloomberg. “We are profitable through the first two months of 2009 and are having our best quarter-to-date performance since the third quarter of 2007.”

Unfortunately, Bloomberg — which I usually recommend and is usually very precise on their reports — didn't finish their sentence. Mish points to this article which complements Bloomberg's:

Based on historical revenue and expense rates, Citi's projected earnings before taxes and one-time charges would be about $8.3 billion for the full quarter.

Pandit declined to say how large credit losses and other one-time items have been that would at least partially offset profit.

Right, so the company is making profits if you exclude the losses! That's quite convenient. So, is Vikram Pandit a big fat liar? Should the SEC do something? Is there a pilot in the plane?

Now, having a look at this report (cheers M. Denninger!), I think it's easy to guess that the Vikram is indeed — for the least we can say — trying to motivate his people...

Citibank, Bank of America , HSBC Bank USA , Wells Fargo Bank and J.P. Morgan Chase reported that their "current" net loss risks from derivatives surged to $587 billion as of Dec. 31. Buried in end-of-the-year regulatory reports that McClatchy has reviewed, the figures reflect a jump of 49 percent in just 90 days.
[...]
Four of the banks' reserves already have been augmented by taxpayer bailout money, topped by Citibank — $50 billion — and Bank of America — $45 billion , plus a $100 billion loan guarantee.
The banks' quarterly financial reports show that as of Dec. 31 :
— J.P. Morgan had potential current derivatives losses of $241.2 billion , outstripping its $144 billion in reserves, and future exposure of $299 billion .
— Citibank had potential current losses of $140.3 billion , exceeding its $108 billion in reserves, and future losses of $161.2 billion .
— Bank of America reported $80.4 billion in current exposure, below its $122.4 billion reserve, but $218 billion in total exposure.
— HSBC Bank USA had current potential losses of $62 billion , more than triple its reserves, and potential total exposure of $95 billion .
— San Francisco -based Wells Fargo , which agreed to take over Charlotte-based Wachovia in October, reported current potential losses totaling nearly $64 billion , below the banks' combined reserves of $104 billion , but total future risks of about $109 billion.

So where does the truth lies? No one knows. Why? Because nobody is willing to force the banks to open their books and show what they are hiding. Why? Probably because the losses far exceed their capital and that would cause a complete meltdown. But the meltdown cannot be avoided, it can only be postponed and that's what Henry Paulson, Bernanke, Geithner, Bush, and Obama are doing: buying time.

Anyway, the one sure thing is that every market bounce led by the financial is yet another bear market rally for the foreseeable future. So when you see shares of Citi, BofA and other bounce as much as 36% in one session, you know: it's not over yet. The market being currently quite oversold after a brutal drop, not so many people are willing to sell their long or short the market at all. So the bounce could last for some time. If the markets bounce enough, it could be the opportunity many are waiting for closing their positions, and the opportunity I am looking for to short it.