On Friday, July 12, Citigroup released data on its earnings for the second quarter of the current year, which testified that the profit of this financial institution has a growth rate exceeding Wall Street’s preliminary expectations for the dynamic of the corresponding indicator.
The mentioned result of one of the largest lenders in the United States is largely due to a 60% increase in revenue from investment banking. Also, in this case, the positive performance indicators of the unit of a financial institution that specializes in services became an impact factor.
Even before the announcement of the results of operations of the bank in the second quarter of the current year, Citi shares rose by 3%.
The profit of the financial institution for the mentioned period was fixed at $1.52 per share. It is worth noting that this result exceeded the preliminary expectations of experts. The consensus forecast of analysts surveyed by LSEG provided that the financial institution’s profit for the second quarter of the current year would be $1.39 per share.
Citi Chief Executive Officer Jane Fraser said that the results of operations for the second quarter of the current year indicate the progress that the financial institution is making in implementing its strategy. Also in this context, she mentioned the bank’s diversified business model, which has several advantages.
It is worth noting that the optimistic results of Citi’s activities in the last quarter were published two days after United States regulators fined the lender $136 million. According to authorities, the reason for this measure of material impact was the insufficient progress of the financial institution in eliminating data management problems that were identified in 2020. Regulators also demanded that the bank demonstrate that it allocates sufficient resources for appropriate purposes. This news did not overshadow Citi’s financial performance, which is unequivocally favorable.
The bank had already booked the penalties and additional investments in the data work in the last quarter.
Currently, the lender is conducting a large-scale reorganization. These efforts of the financial institution are aimed at improving performance indicators. Also, one of the goals of the ongoing reorganization process is to reduce costs. Moreover, one of the expected positive consequences of this process is the simplification of the bank’s sprawling businesses.
As part of the reorganization, the financial institution plans to reduce the number of employees. It is expected that in the course of implementing the relevant intention, the bank’s management will lay off 20,000 people over the next two years.
Citi’s revenue for the second quarter of the current year was fixed at $20.1 billion. This indicator showed an increase of 4% compared to the result for the same period in 2023. The corresponding result is related, among other things, to the profit of $400 million, which was received by the lender as a result of the conversion and partial sale of Visa shares in May.
Currently, Citi breaks out profits separately in five areas of its business, including banking, banking for individuals in the United States, markets, services, and wealth. In the past, the specified lines of activities of the lender were combined into broader units.
The new structure of the financial institution is part of Jane Fraser’s efforts to сut bureaucracy and increase profits. As part of this approach, business segment leaders report directly to the CEO.
In the second quarter of the current year, the investment banking fees of Citi showed growth of 60% year-on-year. In monetary terms, the corresponding figure reached $853 million. A sharp increase in this case was recorded against the background of a prolonged downturn in the number of deals in the industry. It is also worth noting that the mentioned state of affairs is already beginning to show signs of a gradual recovery. Special attention should be paid to the fact that in this case, the pace of recovery is significant. The broader revenue for the global banking division has reached the $1.6 billion mark. This indicator increased by 38% year-on-year. The mentioned amount, among other things, includes the results of activities related to corporate lending.
This year, Citi hired JPMorgan Chase veteran Viswas Raghavan as head of banking. Jane Fraser has high hopes for this specialist, who was tasked with revitalizing the unit serving multinational corporations.
The bank’s revenue from activities related to the provision of services for the second quarter of the current year was fixed at $4.7 billion. This indicator showed an increase of 3% compared to the result for the same period last year. The corresponding unit of the financial institution houses treasury and trading solutions, which the lender positions as its crown jewel. The business had flat revenue in the last quarter, at $3.4 billion. This arm processes $5 trillion of payments a day for multinational corporations across 180 countries.
The bank’s revenue from trading in the markets for the second quarter of 2024 showed an increase of 6% year-on-year. In monetary terms, an amount of $5.1 billion is implied. This result is due to a 37% increase in revenue from stock trading.
The operating expenses of the financial institution in the last quarter were fixed at $13.4 billion. This indicator decreased by 2% year-on-year. The bank saved money as part of a reorganization that simplified its structure.
The financial institution predicts full-year expenses to be at the high end of its previously forecast range of $53.5 billion to $53.8 billion.
The bank’s wealth management unit has yet to go through a growth path. Last quarter, the revenue of this unit of the financial institution reached $1.8 billion. The corresponding indicator increased by 2% year-on-year. It is worth noting that Citi CEO positions the mentioned unit as a major part of the growth strategy.
The income of a financial institution from banking operations with individuals in the United States for the second quarter of the current year amounted to $4.9 billion. This indicator increased by 6% compared to the result for the same period in 2023.
It is widely believed among analysts that 2024 is a turning point for Citi because right now the bank is becoming stronger as a result of the implementation of the Jane Fraser strategy. Investors are pleased with the fact that since the beginning of the current year, the shares of the financial institution have risen in price by 28%.
As we have reported earlier, Wells Fargo Reports Second-Quarter Profit.
