Citigroup profit beats estimates on strong investment banking
Lower tax rate also plays a big role in Citi’s improvement
New York — Citigroup reported higher-than-expected earnings on Monday despite declining revenue as the New York-based lender Citi improved its results in ways, including the expense cutting, that may be tough to replicate in future quarters.
A lower tax rate also played a big role in Citi’s improvement from a year ago.
The bank’s income from continuing operations actually declined slightly. But net income rose because its effective tax rate declined to 21% from 24% a year earlier.
Citi has been investing in digital capability to try to win deposits domestically despite its light US branch network. CEO Mike Corbat said its efforts are showing positive early results.
But the bank is still growing deposits faster abroad than in the US: international consumer deposits rose 3% during the quarter, while retail North American deposits edged up 1%.
JPMorgan Chase on Friday reported that its US consumer deposits were up 3% from a year earlier.
Corbat also pointed to the bank’s improved 11.9% return on average tangible common shareholder’s equity and the fact that it returned $5.1bn in capital to shareholders during the quarter.
“Both our consumer and institutional businesses performed well and we saw good momentum in those areas where we have been investing,” he said.
Investment banking revenue rose 20% to $1.4bn, as strong growth in advisory and investment-grade debt underwriting more than offset a drop in equity underwriting.
Bond trading rose 1% in sharp contrast to Goldman Sachs and JPMorgan, both of which reported declines.
But a 24% drop in equities trading pressured Citi’s overall revenue, which fell 2% to $18.58bn, slightly below analysts’ estimates.
Revenue from consumer banking, the bank’s largest business, was flat at $8.5bn, due to weakness in Asia.
Earlier in 2019, the bank said it would earn $2bn more in revenue from lending activities than it did in 2018.
Total loans at the third-largest US bank by assets rose 3% to $682.3bn, while deposits grew 5% to $1.03-trillion, excluding foreign exchange fluctuations.
Citi’s net interest margin, a closely watched metric, expanded eight basis points to 2.72% in the quarter, while total operating expenses fell 3% to $10.58bn.
Net income rose to $4.71bn, or $1.87 per share, for the first quarter ended March 31 from $4.62bn, or $1.68 per share, a year earlier.
Analysts were looking for a profit of $1.80 per share, according to IBES data from Refinitiv. Shares of the company were up 1.2% in trading before the bell.