Citigroup beat analysts’ expectations for profit and revenue on gains from the initial public offering of electronic bond trading platform Tradeweb.
The bank posted profit of $4.79 billion, or $1.95 per share, compared with the $1.80 estimate of analysts surveyed by Refinitiv. Excluding the impact of the IPO, the bank would have posted $1.83 per share in profit, fueled by lower taxes and a reduction in the number of outstanding shares.
Shares climbed 0.7% in premarket trading at 8:30 a.m. in New York.
While per share profit surged 20% in the quarter, the company’s revenue gain was more muted on declines in trading and investment banking revenue and losses on loan hedges, the bank said. Revenue climbed 2% to $18.76 billion, exceeding the $18.5 billion estimate, powered by a $350 million pretax gain on the Tradeweb IPO, the bank said.
“We navigated an uncertain environment successfully by executing our strategy, and by showing disciplined expense, credit and risk management,” CEO Michael Corbat said in the earnings release.
Citigroup is the first of the big U.S. banks to report second-quarter results, so investors are keen to see how its banking and trading operations performed during the period.
Last month, CFO Mark Mason said at a conference that trading revenue in the quarter would likely decline by a “mid-single-digit” percentage from a year ago.
That proved accurate, as trading revenue excluding the IPO windfall fell 5% on a 9% drop in equities trading revenue to $790 million. Fixed income revenue rose 8% to $3.32 billion, but excluding the Tradeweb transaction, the bank would’ve posted a 4% decline in that division. Investment banking revenue dropped 10% to $1.28 billion.
Shares of the New York-based bank climbed 38% so far this year, compared to the 16% gain of the KBW Bank Index.
Other banks should also benefit from the IPO of Tradeweb, which counted the biggest U.S. banks including Goldman Sachs and Bank of America as investors. Tradeweb, founded in 1996, went public in April in what was then second-biggest IPO of the year.
Here’s what Wall Street expected:
- Earnings: $1.80 a share, 11% more than a year earlier, according to Refinitiv
- Revenue: $18.5 billion, almost unchanged from a year earlier.
- Trading Revenue: Fixed income: $2.98 billion, Equities: $811 million, according to Factset
- Efficiency ratio: 57.3, according to Factset
