Wachovia Corp. on Monday said first-quarter earnings climbed 6.6 percent, boosted by growth in most of its businesses and a $100 million one-time gain related to its credit card business.

The Charlotte-based bank reaped $1.73 billion in profits, or $1.09 per share, up from $1.62 billion, or $1.01 per share, in the same period last year. Excluding merger costs, Wachovia made $1.12 per share, matching analyst estimates.

The nation's No. 4 bank by assets, as usual, made the bulk of its money from its banking business, but it also gathered more profits from its stock brokers and traders. The results also included $87 million in net interest income from the March 1 acquisition of auto finance company Westcorp.

"It was a good quarter with good momentum," Chief Financial Officer Tom Wurtz said in an interview. He was making his first earnings report as CFO, taking over for Bob Kelly who left earlier this year to become chief executive at Mellon Financial Corp.

The numbers came a day before Wachovia's annual shareholder meeting today in Charlotte and as other banks began their quarterly barrage of earnings reports. Charlotte-based Bank of America Corp. issues its earnings Thursday.

The financial services industry continues to face difficult operating conditions as rising short-term interest rates squeeze the difference between what banks pay on deposits and the long-term rates they charge on loans. During the quarter, Wachovia's net interest margin slipped to 3.21 percent from 3.25 percent.

"It's really the only negative we're experiencing," said Wurtz, who noted the increase in retail investing and strong capital markets activity.

Although conditions are expected to remain tough for banks, some relief could be in sight. The Federal Reserve has hinted its short-term interest rate hikes could halt soon, and long-term rates have risen in recent weeks.

Despite the tough environment, Wachovia managed to rake in $7.1 billion in revenue during the quarter, up 2 percent from the same period last year. Half of this revenue came from fees and other income, including the $100 million credit card payment.

Rival Bank of America Corp. paid Wachovia the sum because of its Jan. 1 acquisition of credit card issuer MBNA Corp. Wachovia previously outsourced its credit card operations to MBNA, but had a clause in its contract requiring the payment if Bank of America ever bought the Delaware-based credit card giant. Because of the merger, Wachovia opted this year to launch its own credit card operations.

To balance out the bump in earnings, Wachovia took a number of one-time expenses in the quarter. The company recorded $64 million in investment losses and took $98 million in expenses for a change in the accounting of stock options.

Analyst Gary Townsend of Friedman Billings Ramsey in Virginia had expected the payment from Bank of America, but not some of the stock options expenses. Overall, he called it a good quarter for the bank.

"Generally, all of the businesses seem to be tracking pretty strongly," said Townsend, who does not own Wachovia stock although his firm seeks to do business with the company. "They continue to do well holding on to and expanding market share."

The only main business to report an earnings decline during the quarter was wealth management, which offers private banking and insurance services. Executives attributed the drop-off to extra expenses for personnel and systems as the unit changes the way it provides investment advice to clients.

Wachovia, Charlotte's biggest employer, added 3,100 employees from its Westcorp acquisition, giving it a total of about 97,000 worldwide.The company, however, continues to move forward with an efficiency initiative that it has said will cost up to 4,000 jobs by 2007. As part of this effort, the company plans to start sending some business processing functions to India-based Genpact later this spring or early summer.

"For us and everyone else, outsourcing is a part of the reality going forward," Chief Financial Officer Tom Wurtz said in an interview. "I think we're doing it in a very thoughtful way."

Citigroup Inc., the nation's largest financial institution, said its profit rose 4 percent in the January-March period to $5.64 billion, or $1.12 per share, buoyed by record investment banking results and a solid performance by its international business. The bank topped Wall Street projections.

Driving results from the New York-based financial services conglomerate was record revenue at its securities unit and its international bank, which helped lift revenue from continuing operations to $22.18 billion from $21.20 billion a year ago.

The Atlanta-based company posted net income of $531.5 million, or $1.46 per share, versus a prior-year profit of $492.3 million, or $1.36 per share. Wall Street had forecast a profit of $1.43 per share.

Charlotte shareholder activist John Moore told the Observer he plans to speak at SunTrust's annual meeting today in Atlanta. He is concerned about corporate governance issues and the company's stock performance.

This is cache, read story here