Citigroup on Tuesday, October 15, released information about its earnings for the third quarter of the current year, which exceeded the preliminary expectations of Wall Street analysts.
The mentioned result is largely related to the upward dynamic in the lender’s investment banking business. Also, in this case, the activity of a financial institution for wealth management became a factor of positive impact. However, the bank sets aside more money to offset potential loan losses.
After the data on the lender’s performance in the third quarter of the current year were released, the value of its shares showed growth. However, the corresponding tendency turned out to be short-term. The bank’s shares ended the day with a significant decline of 5.1%.
The revenue of the financial institution, which is one of the largest in the United States, for the third quarter of the current year was fixed at $20.32 billion. This indicator showed an increase of 1% compared to the result for the same period in 2023. It is worth noting that the preliminary LSEG estimate provided that the revenue of the financial institution for the third quarter of 2024 would be fixed at $19.84 billion.
The upward dynamic of the mentioned indicator is largely due to an increase in banking revenue by 18% and a rising gain in the investment banking arm by 31%. Also, in this context, the growth of wealth revenue by 9% should be mentioned.
Earnings per share for the mentioned period amounted to $1.51. The preliminary LSEG estimate provided that the corresponding figure would be fixed at $1.31.
The net income of the financial institution for the third quarter of the current year amounted to $3.2 billion. For the same period in 2023, this figure was fixed at $3.5 billion. The higher cost of credit has become a factor impacting the dynamic of earnings of a financial institution. In this case, among other things, it implies a net build of $315 million in Citi’s allowance for credit losses.
The bank’s chief financial officer Mark Mason, during an analyst call on Tuesday, said that the lender is currently observing stabilization of loan delinquencies among its retail services clients and is well reserved in that area.
The revenue of a financial institution in equity markets in the third quarter of 2024 increased by 32% year-on-year. At the same time, fixed-income revenue for the corresponding period fell by 6%.
Citi’s chief executive officer Jane Fraser took over the financial institution in March 2021. She focused on slimming down the bank. The process of implementing the relevant plan includes solutions such as reducing the scale of the financial institution’s global presence and laying off employees.
Commenting on the bank’s results for the third quarter of the current year, Jane Fraser said that the transformation of the lender is the number one priority. According to her, last quarter the financial institution closed another longstanding consent order which related to the effectiveness of its anti-money laundering systems. She also separately stated that the bank has increased its investment in those sectors of activity where it has not made sufficient progress, for example, in data quality management. Moreover, Jane Fraser stated that she and the management team remained steadfast and determined to get the mentioned transformation right and to get this done.
The net interest income of a financial institution for the third quarter of the current year was fixed at $13.4 billion. This indicator decreased by 3% compared to the result for the same period in 2023. The dynamic net interest income of a financial institution was impacted by such a factor as margin shrinkage.
The bank expects that the nonmarkets metric in the fourth quarter of 2024 will be approximately the same as in July-September. At the same time, the financial institution has not released the net interest income guidance for the next year.
The bank did drive down expenses for the third quarter of 2024. The corresponding indicator decreased by 2% year-on-year. The financial institution expects its expenses for the whole of 2024 to range from $53.5 billion to $53.8 billion. It is worth noting that in this case, some regulatory costs are not taken into account.
Since the beginning of the current year, the value of the financial institution’s shares has increased by more than 28%. Attention should be paid to the fact that the degree of intensity of the corresponding upward dynamic exceeded the rate of rise of the S&P 500 and the appropriate average for the financial sector.
It is worth noting that some other major banks in the United States have also already released data on their earnings for the third quarter of the current year. For example, the corresponding results of Goldman Sachs and JPMorgan Chase exceeded preliminary expectations.
