Citigroup profit drops 36 per cent on trading slump, rising expenses

People walk past a CitiBank branch on Avenue of the Americas, in New York, April 9, 2008. — Reuters pic

Friday, 14 Jul 2023 11:53 PM MYT

NEW YORK, July 14 — Citigroup beat analysts’ estimates for second-quarter profit today as higher interest payments from borrowers partly countered a blow to its Wall Street businesses from a slump in trading.

The bank’s net income tumbled 36 per cent to US$2.92 billion (RM13 billion), or US$1.33 per share, in the three months to June 30. The profit was weighed down by higher costs for layoffs and increased provisions for credit losses, the bank said.

In markets, “clients stood on the sidelines in April while the debt ceiling played out,” CEO Jane Fraser said in a statement. Meanwhile, “the long-awaited rebound in investment banking has yet to materialize, making for a disappointing quarter.”

Markets revenue declined 13 per cent to US$4.6 billion, while and investment banking fees plunged 24 per cent to US$612 million.

The drop in Citi’s net income contrasted with higher profits at JPMorgan Chase, which earned more from interest payments and benefited from the purchase of First Republic Bank, and at Wells Fargo.

Citi’s net interest income (NII) jumped 18 per cent at the most global US lender, mirroring gains at JPMorgan and Wells Fargo. NII measures the difference between what banks earn on loans and pay out on deposits.

The results come amid rising expectations that the Federal Reserve’s hefty rate hikes that have boosted profits at big US banks in the past few quarters may be nearing an end. Citigroup raised its guidance for NII for the full year by US$1 billion.

“The US economy is proving to be quite resilient, with strong balance sheets both on the consumer side and the corporate side,” CFO Mark Mason said told reporters on a conference call.

Delinquency rates in credit cards and other retail lines are rising and expected to reach “normal levels” by the end of the year, he said.

Citi posted double-digit revenue growth each in its services unit as well as treasury and trade solutions (TTS), a business executives have described as the company’s crown jewel.

Excluding one-off items, Citi earned US$1.37 per share, topping the US$1.30 expected by analysts, according to Refinitiv IBES data.

Mason said the bank had not decided yet on potential share buybacks in the third quarter in light of rising capital requirements from the Federal Reserve.

Citigroup is in talks with the Fed to better understand changes that led to a higher capital buffer after it passed an annual health check. Citi is not contesting the Fed, but trying to understand methodology changes, he added.

Shares of the New York-based lender fell 2.5 per cent. JPMorgan and Wells Fargo rose slightly. — Reuters