UPDATE 2-Citigroup profit beats on higher bond trading, lower costs

Citigroup Inc reported a better-than-expected quarterly profit on Friday, helped by lower expenses, higher bond trading revenue and strength in its consumer banking business in Mexico.

Investors have been waiting to see how trading revenue fared at the five big Wall Street banks due to an escalating U.S-China trade war and executives warning that the business's growth would be muted.

Citigroup reported a 9 per cent jump in bond trading revenue, outperforming bigger rival JPMorgan Chase & Co, which reported a 10 per cent drop in fixed-income trading revenue.

Chief Financial Officer John Gerspach, who plans to retire next year, had previously said Citigroup expected total fixed income and trading revenue to be "flat to slightly higher" in the third quarter.

The bank's shares rose 2.4 per cent to $70.20 in early trading.

Citigroup reported a 2 per cent rise in global consumer banking revenue. The bank recently restructured its U.S. consumer business to operate more like those in Asia and Mexico, where it has been seeing better results.

Consumer banking revenue in Latin America rose 20 per cent, including a gain on the sale of an asset management business in Mexico. Excluding that gain, revenue rose 8 per cent on a constant currency basis, boosting global consumer banking revenue 3 per cent.

North America branded card business reported a 3 per cent drop in revenue, largely due to the sale of the Hilton hotels portfolio.

Excluding the sale, total net interest revenue from the business was $1.88 billion, up 5 per cent from the second quarter and 3 per cent from a year earlier.

The card business has been a cause for concern among investors and the Wall Street bank has been looking to improve its performance.

Net income for the third-largest U.S. bank by assets rose to $4.62 billion in the third quarter ended Sept. 30, from $4.13 billion a year earlier.

Earnings per share rose to $1.73 from $1.42, helped by buybacks that reduced shares outstanding by 8 per cent from a year earlier.

Analysts on average had expected earnings per share of $1.69, according to I/B/E/S data from Refinitiv.

Total revenue was slightly lower at $18.39 billion, from $18.42 billion a year earlier.

Operating expenses fell 1 per cent to $10.31 billion and the company's widely watched efficiency ratio improved to 56.1 per cent from 56.6 per cent a year earlier.

Citigroup's provision for income taxes fell by $395 million following changes in the U.S. tax code, which reduced the bank's tax rate to 24 per cent in the quarter from 31 per cent a year earlier.

The bank's return on tangible common equity was 11.3 per cent in the quarter, inching closer to Chief Executive Officer Mike Corbat's goal of 13.5 per cent in 2020.

Up to Thursday's close, Citi shares have lost 8 per cent of their value for the year, compared with a 5 per cent drop in the broader KBW Bank Index.