Citigroup profit beats estimates on reserve release
Investment banking revenue increased 39% to $1.9 billion, helping offset a 16% decline in fixed-income revenue from a year earlier when there was unprecedented volatility in the markets. Higher expenses and lower net interest revenue weighed on results as did customers using their stimulus checks to pay down their credit card loans.
Citigroup Inc beat market estimates for third-quarter profit on Thursday, as the bank released loan loss reserves and reaped a windfall of fees from equity underwriting and investment banking advice. For the three months ended Sept. 30, net income jumped 48% to $4.6 billion, or $2.15 per share, from $3.1 billion, or $1.36 per share, a year earlier. Analysts on average had expected a profit of $1.65 per share, according to Refinitiv IBES data.
The bank's profits were buoyed by its decision to take down $1.16 billion of loss reserves built during the pandemic for potentially sour loans that have not materialized. A year earlier Citigroup had added $436 million to its reserves. Investment banking revenue increased 39% to $1.9 billion, helping offset a 16% decline in fixed-income revenue from a year earlier when there was unprecedented volatility in the markets.
Higher expenses and lower net interest revenue weighed on results as did customers using their stimulus checks to pay down their credit card loans. "I am quite pleased with $4.6 billion in net income given the environment we are operating in," Chief Executive Officer Jane Fraser said in the results announcement.
Operating expenses increased 5% to $11.5 billion as the company ramped up spending on technology and personnel to improve its control systems to comply with demands made by regulators a year ago. Net interest revenue declined 1% from a year earlier, but was 2% more than in the second quarter, suggesting an end to the downward trend that started when the pandemic began and the Federal Reserve cut interest rates to near zero and many borrowers paid down their loan balances.
Lower interest rates also hurt Citigroup's Treasury and Trade Solutions business, which saw revenue decline 4% even as it collected more fees and saw growth in trading. Revenue from Citi-branded cards in North America declined 1% and revenue from cards issued for retailers fell 6%.
The results included the impact of a loss on the previously announced sale of its Australia consumer banking business. Excluding the loss on the sale, revenue increased 3%, driven by the institutional business.
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