Citigroup (NYSE:C) second quarter earnings topped analysts’ estimates even though they saw a 46% drop in profit. The stock pre-market traded higher at 46.39+2.22 or 5.10% after the results. Citi saw revenue drop in investment banking 46%, mirroring declines seen at JPMorgan Chase and Morgan Stanley releases yesterday. On the positive side trading profit from trading were up strongly. The bank’s profitability on lending increased thanks to the Federal Reserve’s interest rate increases. Net interest margin, a gauge on lending profits, rose to 2.24% from 2.05% in the first quarter.
Reporting also this week were JPMorgan Chase (JPM) PNC Bank (PNC), Morgan Stanley MS and Wells Fargo (WFC) along with BlackRock (BLK). The earnings come red hot CPI and PPI.
Citigroup Q2 2022
Q22022 earnings before the open; conference call at 11 a.m. ET Friday
- Adjusted earnings of $2.19 a share on revenue of $19.6 billion, exceeding projections by analysts surveyed by FactSet who expected Citigroup to earn $1.68 a share on revenue of $18.4 billion.
- Net income totaled $4.5 billion, marking a 27% decline from last year.
- In the year-ago quarter, Citigroup earned $2.85 a share on $17.5 billion in revenue
- In Citi’s institutional clients group, which contains its investment bank and serves corporate clients, revenue rose 20% and profit rose 16%.
- The bank was boosted by a strong trading quarter amid market turmoil, with markets revenue up 25% on a 31% increase in fixed-income trading, the dominant business for Citi’s results.
- Revenue rose 28% in the services and treasury and trade businesses that help big companies manage and move money around the globe.
- Gains there were offset by a 46% drop in fees from investment banking. Deal making slowed, along with stock and bond sales.
- Revenue in the consumer bank and wealth management operations rose 6% while its profit dropped 69% on the loan-loss reserves.
- Consumer spending on Citi-issued credit cards rose 16% in the quarter and balances they carried increased.
- Expenses at the bank rose 8% to $12.4 billion. Citigroup is under regulatory orders to improve its vast systems that monitor risks for the bank and its clients, a multiyear project that requires heavy spending.
- Return on tangible common equity, a closely watched profitability metric, hit 11.2%, far higher than the 8.8% analysts had predicted.
- The bank’s profitability on lending increased thanks to the Federal Reserve’s interest rate increases. Net interest margin, a gauge on lending profits, rose to 2.24% from 2.05% in the first quarter.
Last quarter Citigroup had its first investor day in five years and unveiled medium-term financial targets and spoke of efforts it is making to improve internal controls and streamline its operations. As part of its turnaround efforts, Citigroup is looking to develop its wealth management and treasury and trade solutions businesses while shedding non-core assets. Friday’s results indicated that the bank may be on the right course.
““Treasury and trade solutions fired on all cylinders as clients took advantage of our global network, leading to the best quarter this business has had in a decade,” Jane Fraser, chief executive at Citigroup, said Friday.
Over the last year, the bank announced plans to exit 14 international markets and has made progress on either closing sales or winding down 10 of those businesses. The bank said Friday that it was weighing all options of its Russia business after previously seeking a sale.
However, the exits from Australia and South Korea have not been smooth and cost Citigroup nearly $1.7 billion before the Russian invasion of Ukraine. Russia is one of 13 consumer markets it was planning to exit. With Russia’s invasion of Ukraine, the bank warned last quarter it lost a range of $2.5 billion to $3 billion, reflecting efforts the bank has taken over the last few months to minimize risks.
Source: JPM, WFC, C, BLK,
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