Citigroup stock posted third-quarter earnings on Friday morning, with good growth in both institutional and personal banking driving higher-than-expected revenue.
- IMPORTANT NOTES
- Year on year, revenue and net income increased by 9% and 2%, respectively.
- Citigroup’s institutional clients division reported $10.6 billion in revenue, a 12% increase year over year and a 2% increase from the previous quarter.
- Citigroup’s shares was down 8% year to date as of Friday.
Here’s how the company’s announcement compares to what Wall Street expected, according to an LSEG, formerly known as Refinitiv, survey of analysts:
- $1.63 per share in earnings. Due to divestitures, the estimated $1.21 is not comparable. Earnings per share were $1.52 before divestitures.
- Revenue: $20.14 billion, compared to $19.31 billion predicted
Year on year, revenue and net income increased by 9% and 2%, respectively. Citigroup’s institutional clients division reported $10.6 billion in revenue, a 12% increase year over year and a 2% increase from the previous quarter. Personal banking and wealth management revenue was $6.8 billion, increasing nearly 10% year on year and 6% from the previous quarter.
“Despite the headwinds, each of our five core, interconnected businesses posted revenue growth, resulting in overall growth of 9%,” stated CEO Jane Fraser in a news release.
The bank’s stock was up more than 2% in early trading. Citigroup’s shares was down 8% year to date as of Friday. JPMorgan and Wells Fargo, two other banks that published quarterly results on Friday morning, both posted higher-than-expected revenue numbers in their third-quarter reports.
Citigroup reported a total cost of credit of $1.84 billion at the end of the quarter, up from $1.82 billion at the end of the second quarter and $1.37 billion a year ago. During the third quarter, the allowance for credit losses was increased by $125 million. Citigroup will hold a conference call later Friday morning to discuss the results. Investors will be searching for further information about the bank’s restructure under Fraser.
Also Read: JPMorgan Chase Shares Rise After Profit Beats Forecasts On Higher Rates And Favorable Credit
The period covered by Friday’s results release includes the announcement by Fraser that the bank would be separated into five primary business divisions, the latest upheaval for the CEO since taking over in March 2021. The new structure, which was unveiled on September 13, is expected to result in employment layoffs.
Another Fraser initiative has been the sale of Citi’s retail banking business in various international countries. On October 9, the bank announced that it had reached an agreement to sell its onshore consumer wealth portfolio in China.
“If you look back in history, it shows that the ability to tame inflation really does require labor market loosening, resulting in higher unemployment and a recession. But … the U.S. keeps surprising us with its resilience,” Mason said.
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Even though default levels were still modest in comparison to historical levels, the third largest U.S. lender set aside additional money to cover possible bad loans. Citi’s total provision for credit portfolio increased to $17.6 billion from $16.3 billion the previous year. Simultaneously, lenders have profited from the Federal Reserve’s anti-inflationary drive, which has boosted borrowing prices and allowed banks to earn more from client interest payments.
Personal banking and wealth management revenue increased 10% to $6.8 billion. Deposits totaled $1.3 trillion at the end of the third quarter, a 3% decrease from the previous year as clients shifted to higher-yielding assets.
“We announced consequential changes that align our organizational structure with our strategy and changes how we run the bank,” CEO Jane Fraser said in a statement. Citi has not yet published the anticipated staff reductions and savings associated with the reorganization, which will cut managerial layers and result in layoffs across its companies.
Fraser stated that there was “no room for bystanders” as the bank started on its most significant makeover in nearly two decades. The reforms are being implemented during a period of economic uncertainty, which has dragged on some of Citi’s major businesses, such as trading.
Due to rising prices and investments in control systems, expenses increased 6% to $13.5 billion. Severance payments were included for employees who were laid off after the sale of its foreign companies. On Friday, rivals Wells Fargo (WFC.N) and JPMorgan Chase (JPM.N) posted greater quarterly profits, helped by increased interest payments.
Also Read: US Inflation In September Was Higher Than Expected
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