Citigroup Inc. (C, Financial) posted its second-quarter financial results before the market opened on July 14. The company recorded an earnings and revenue beat for the quarter, helped by a rise in trading revenue, which was only partly negated by a declining consumer banking business.
Shares surged 2% in premarket trading following the news.
Performance at a glance
The New York-based bank reported net income of $1.3 billion, which reflected a decline of 73% over the past year. The metric was weighed down by considerably higher allowance for credit loss reserves.
Adjusted earnings were 50 cents per share versus 38 cents expected. Quarterly revenue came in at $19.8 billion, surpassing estimates of $19.2 billion.
The company’s operating expense dropped 1% to $10.4 billion, driven by efficiency savings as well as lower marketing and other discretionary spending. Credit costs amounted to $7.9 billion, up from $2.1 billion the year before.
Net credit losses of $2.2 billion climbed 12% on a year-over-year basis. At quarter-end, the company’s allowance for credit losses on loans stood at $26.4 billion, or 3.89% of total loans. That compares with $12.5 billion, or 1.82% of total loans, reported last year.
In a statment, CEO Michael Corbat commented on the bank's performance amid the coronavirus pandemic:
“We entered this crisis from a position of strength. During the quarter, our regulatory capital increased and our CET1 ratio improved to 11.5%, comfortably above our new regulatory minimum of 10%. We continued to add to our substantial levels of liquidity and our balance sheet has plenty of capacity to serve our clients. With a sharp emphasis on risk management, we are prepared for a variety of scenarios and will continue to operate our institution prudently given this unprecedented situation.”
Segment details
Global consumer banking revenue declined 10% to $7.3 billion on lower loan volumes, reflecting lower consumer spending on account of the coronavirus pandemic. This was partly offset by robust deposit growth.
In contrast, sales for the institutional clients group segment totalled $12.1 billion, up 21%. The growth was boosted by a rise in fixed income and investment banking revenue.
Within the segment, markets and securities revenue inched up 48% to $6.9 billion, primarily reflecting a 68% increase in fixed-income trading revenue. Moreover, equity market revenue surged 3% to $770 million thanks to a strong performance in cash equities, which was partially offset by declining revenue in derivatives and prime finance. Security service revenue was $619 million.
Corporate revenue fell nearly 50% to $290 million.
Disclosure: I do not hold any positions in the stocks mentioned.
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