Tight leash on costs helps Citigroup trump Wall Street view

FAN Editor
FILE PHOTO: A view of the exterior of the Citibank Corporate headquarters in the Manhattan borough of New York
FILE PHOTO: A view of the exterior of the Citibank Corporate headquarters in the Manhattan borough of New York City, May 20, 2015. REUTERS/Mike Segar/File Photo

October 12, 2017

(Reuters) – Citigroup Inc’s <C.N> quarterly profit and revenue beat Wall Street expectations as the bank kept a tight lid on costs, booked a gain from an asset sale and saw strength in equity underwriting.

The bank’s trading revenue, despite falling 11 percent, was better than the 15 percent decline Chief Financial Officer John Gerspach forecast three weeks ago.

Trading revenue has cast a dark cloud over bank results. Rival JPMorgan Chase & Co <JPM.N> said its trading revenue fell 21 percent.

Citigroup shares were slightly higher at $75 in pre-market trade, while JPMorgan was up at $97.67. Wall Street banks have seen major declines in market trading activity, which was boosted last year on global macroeconomic uncertainty, especially around Brexit and the U.S. presidential election.

The fourth-biggest U.S. bank by assets said on Thursday total revenue rose about 2 percent to $18.17 billion, topping expectations of $17.90 billion. But revenue from fixed-income trading fell 16 percent to $2.88 billion.

There were bright spots as the bank’s much smaller equities trading business saw a 16 percent increase in revenue and investment banking, which includes equity underwriting, rose 14 percent.

Net income rose 7.6 percent to $4.13 billion in the third quarter ended Sept. 30. Earnings per share rose about 15 percent to $1.42 and trumped analysts’ average estimate of $1.32, according to Thomson Reuters I/B/E/S.

Expenses at the bank were $10.17 billion, 2 percent lower than last year.

Since taking over five years ago, Chief Executive Michael Corbat has been trying to boost shareholder value by cutting expenses, consolidation and buying back stock.

Return on tangible common equity rose to 8.4 percent from 7.8 percent. Corbat’s target for the measure of profitability is 10 percent in 2019 and 14 percent longer term.

Consumer credit is a cause for concern for the bank as Citigroup said its company-wide net credit losses rose 17 percent from a year earlier. It added $194 million to its loan loss reserves.

Total credit costs rose 15 percent to $2 billion.

Citigroup’s tangible book value per share, an accounting measure of net worth, was $68.55 at the end of September, up 6 percent from a year earlier.

Bank of America Corp <BAC.N> and Wells Fargo & Co <WFC.N>, the second- and third-biggest U.S. banks by assets, are scheduled to report quarterly results on Friday.

(Reporting by Sweta Singh in Bengaluru and David Henry in New York; Editing by Bernard Orr)

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