Citigroup Inc. (C, Financial) posted its third-quarter 2020 financial results before the market opened on Oct. 13. The company recorded an earnings and revenue beat for the quarter, helped by a rise in trading revenue, which was only partly negated by declining interest income in the 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 $3.2 billion, which reflected a decline of 34% over the past year. The metric was weighed down by considerably higher allowance for credit loss reserves.
Adjusted earnings were $1.40 per share versus the 93 cents that analysts expected. Quarterly revenue came in at $17.3 billion, surpassing estimates of $17.2 billion.
The company's operating expense surged 5% to $11 billion, driven by civil penalties of $400 million, investments in infrastructure and higher coronavirus-related expenses. This was partly negated by efficiency savings as well as lower marketing and other discretionary spending.
The bank provisioned and set aside an amount for potential loan defaults during the quarter, but the amount set aside was lower than the value provisioned earlier in the year. The company's additional provision for credit losses amounted to $2.26 billion, down from $7.9 billion in the previous quarter.
Net credit losses of $1.9 billion were lower than the $2.2 billion recorded in the prior three-month period. At quarter's end, the company's allowance for credit losses on loans stood at $26.4 billion, or 4% of total loans. That compares with $12.5 billion, or 1.82% of total loans, reported last year.
In a statement, CEO Michael Corbat commented on the bank's performance:
"Our capital position strengthened during the quarter with our Common Equity Tier 1 ratio increasing to 11.8% and our Tangible Book Value per share increasing to $71.95. We remain committed to returning capital to our shareholders, subject to the industry-wide approach determined by the Federal Reserve."
Segment details
Global consumer banking revenue declined 13% to $7.2 billion on lower loan volumes, reflecting lower consumer spending. This was partly offset by robust deposit growth.
In contrast, sales for the institutional clients group segment totalled $10.4 billion, up 5%. The growth was boosted by a rise in fixed income and investment banking revenue.
Within the segment, markets and securities revenue was up 16% to $5.2 billion, primarily reflecting an 18% increase in fixed-income trading revenue. Moreover, equity market revenue surged 15% to $875 million thanks to a strong performance in cash equities and derivatives, which was partially offset by declining revenue in prime finance. Security service revenue was $631 million.
Disclosure: I do not hold any positions in the stocks mentioned.
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