Citigroup profit sinks 27% on loan loss provisions, dealmaking slump

Citigroup Inc posted a 27% decline in second-quarter profit on Friday as the third-largest U.S. bank added reserves for potentially sour loans and its investment banking business took a hit from a slowdown in corporate dealmaking. Profit fell to $4.5 billion, or $2.19 a share, in the quarter ended June 30, from $6.2 billion, or $2.85 a share, a year earlier.

Citigroup Inc posted a 27% decline in second-quarter profit on Friday as the third-largest U.S. bank added reserves for potentially sour loans and its investment banking business took a hit from a slowdown in corporate dealmaking.

Profit fell to $4.5 billion, or $2.19 a share, in the quarter that ended June 30, from $6.2 billion, or $2.85 a share, a year earlier. Analysts on average had expected a profit of $1.66 per share, according to Refinitiv IBES data. It was not immediately clear if the reported numbers were comparable to estimates.

Credit costs rose to $1.3 billion, a sharp contrast to the $1.07 billion benefit a year earlier. The shift came as the bank added $375 million to its loan-loss reserves in the face of growing recession fears. A year earlier, exceptional government stimulus and the economy's recovery from the pandemic had allowed it to release $2.4 billion of reserves.

Concern around a potential U.S. recession has deepened in recent months as an unabating rise in inflation pushes the Federal Reserve to aggressively hike interest rates, increasing market volatility. The market moves have dried up underwriting and advisory fees for investment bankers who drove Wall Street's profit during the depths of COVID-19. Investment banking revenue fell 46% to $805 million in the quarter.

But strong results in trading provided an offset with a 25% jump in revenue to $5.3 billion as Citi cashed in on the volatility across assets, especially fixed income, commodities and foreign exchange, a particularly strong segment for the global bank. The Treasury and Trade Solutions business - Citi's crown jewel - posted a 33% jump in revenue to $3 billion thanks to higher net interest income and fee growth.