Citigroup beats market expectations for third-quarter profit

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Citigroup beats market expectations for third-quarter profit

Reuters - 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 September 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 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 $1.16 billion of loss reserves built during the Pandemic for potentially sour loans that have not materialized. A year earlier, Citigroup added $436 million to its reserves.

Investment banking revenue increased to $1.9 billion by 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 consumers using their stimulus checks to pay down credit card loans.

I am pleased with $4.6 billion of net income (based on the environment we operate in), Chief Executive Officer Jane Fraser said in the announcement of the results.

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 one year ago.

Net interest revenue decreased 1% from a year earlier, but was 2% more than in the second quarter of the year, suggesting an end to the downward trend that began when the pandemic began and the Federal Reserve reduced interest rates to near zero and many borrowers paid down their loan balances.

Low interest rates also hurt Citigroup's Treasury and Trade Solutions business, which saw revenue drop 4% even as it collected more fees and saw growth in trading.

Revenue from Citi-branded cards in North America fell 1% and revenue 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 loss on the sale, revenue increased 3%, driven by the institutional business.