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People use ATMs, pedestrians reflecting on the window of a Citigroup Inc. branch in New York.
Photographer: Mark Kauzlarich / Bloomberg
Photographer: Mark Kauzlarich / Bloomberg
AT Citigroup Inc., bean counting and boring banking are on the rise. Trading, not so much.
The lender's cost reduction exceeded analysts' expectations, while the Consumer division posted its strongest second quarter since 2013. Together, it outperformed the company's Wall Street operations, where traders reported a surprise increase the proceeds of the bought deal debt while the traders experienced difficulties.
Photographer: Jason Alden / Bloomberg
"We have good momentum and solid growth in our consumer segment, particularly in the United States," Chief Executive Michael Corbat said in a statement on Monday. "We managed to navigate an uncertain environment by implementing our strategy."
Citigroup shares climbed 0.8% to 8:15 am early trading in New York.
The results of Citigroup, the first giant US bank to publish its results for the quarter, highlight how tough it is for traders, even when stocks reach record highs. Markets continue to be shaken by the unpredictable threats of President Donald Trump to raise tariffs on countries such as China and Mexico, as well as the changing stance of the Federal Reserve on interest rates. This led investors to stay on the sidelines, which had a negative impact on banks to match buyers with sellers.
At Citigroup, transaction revenue fell for three consecutive quarters from the previous year. This time, it slipped about 5%, excluding a one-time gain on a stake in Tradeweb Markets Inc., which has launched an initial public offering for savings. The decline was worse than predicted by analysts.
Citigroup's efforts to improve the efficiency and revenue of consumers have been a sore point for shareholders at the beginning of the year. Investors pay close attention to costs because the company's overall business figure has increased by less than 1% by 2018. Unable to control their spending quickly, executives have missed their target costs , thus undermining their credibility with analysts.
Lower the costs
Corbat predicted that the company could save up to $ 600 million a year after investing in technologies to manage its operations. The second quarter was marked by progress, with spending down 2% to $ 10.5 billion, down nearly $ 100 million from analysts' average estimates.
Investment banking revenues fell 10% to $ 1.28 billion. This performance was slightly better than that estimated by analysts, helped by an unexpected 2% gain on debt charges. Mergers and acquisitions consulting revenues dropped 36%.
The situation in the consumer goods sector improved in the second quarter, with additional deposits of $ 3 billion and a 6% increase in cardholder spending. In total, personal banking revenues increased 3% to $ 8.51 billion, exceeding analysts' forecasts. The revenues from these operations had stagnated in the first three months of this year.
Read more: Air miles for a bank account? Citi in conflict with Goldman online
Competitors JPMorgan Chase & Co., Wells Fargo & Co. and Goldman Sachs Group Inc. are is expected to release its results on Tuesday, followed by Bank of America Corp. and Morgan Stanley later in the week.
Here are some other key figures of the quarter:
- Citigroup has set aside $ 2.09 billion to cover the costs associated with the release of credits, a 16% increase in line with analysts' estimates. Citigroup attributed this increase to additional card spending and a "normalization" of credit quality within the institutional sector.
- Total revenues increased 2% to $ 18.8 billion, including the $ 350 million gain related to Tradeweb, an electronic trading platform. Analysts had forecast $ 18.5 billion.
- Net income rose 7% to $ 4.8 billion. Earnings per share excluding gain on Tradeweb is $ 1.83. Analysts had estimated adjusted earnings per share at $ 1.80.
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