Citigroup profits soar as consumers rebound

Revenue fell 12% to $ 17.47 billion. This has consistently exceeded analysts’ expectations of $ 17.22 billion.

“The pace of the global recovery is exceeding previous expectations and with it, consumer and business confidence is rising,” Chief Executive Officer Jane Fraser said in a statement.

A year ago, Citigroup and other big banks were building up funds to prepare for huge losses on consumer and business loans. But those losses did not materialize and banks cut their funds on rainy days. In the second quarter, Citigroup released about $ 2.4 billion in loan loss reserves, boosting profits.

This change has particularly benefited the Citigroup World Bank of Consumers. This unit made a profit of $ 1.83 billion compared to a loss a year ago. Consumer incomes fell 7%.

Spending on Citigroup-issued credit cards is up 40% from a year ago, at the height of the Covid pandemic. It is also up 6% compared to the 2019 period, before the global pandemic. But bank customers continue to pay off their credit cards at unusually high rates and interest rates remain low, reducing loan profits.

Net interest income, the amount the bank makes on loan interest minus what it pays on deposits, fell 8%.

In the institutional client group, which includes investment banking and trading, profit more than doubled to $ 3.82 billion and revenues fell 14%.

Trading income fell 33% from a record a year ago, when pandemic uncertainty made markets particularly volatile. Fixed income trading plunged, but equity trading increased. Goldman Sachs Group Inc.

reported a 32% drop in trading revenue in the second quarter, and JPMorgan Chase & Co. reported a 30% drop.

The string of hot deals that fueled Goldman and JPMorgan also helped lift Citigroup bankers. M&A advisory fees climbed 77% while share subscription fees rose 11%. Debt underwriting fees fell by 21%.

The low rates have also reduced its core cash and trading activity, which helps businesses manage their cash flow. Its turnover fell by 1%.

Across the bank, spending rose 7% to $ 11.19 billion. Analysts and investors are worried about Citigroup’s rising costs thanks to a regulatory order to overhaul its extensive risk management systems.

Stocks rose 1.9% in morning trading. The stock has lagged behind its peers from major banks and the broader stock market this year, rising 11% through Tuesday.

Write to David Benoit at [email protected]