Citigroup Inc. (C, Financial), a major global bank, said on Monday that revenues for the second quarter increased just 2% from the prior-year quarter as sales declines in Investment Banking, Fixed Income and Equity Markets offset higher sales in Global Consumer Banking.
For the three months ending June 30, the New York-based bank reported net income of $4.8 billion, or $1.95 per diluted share, compared to $4.5 billion, or $1.63 per diluted share, in the prior-year quarter. Revenues of $18.8 billion outperformed the Refinitiv estimate by approximately $300 million.
Bank accelerates revenue growth in Global Consumer Banking
Citigroup CEO Michael Corbat said the bank reported its 11th consecutive quarter of positive operating leverage, with net expenses declining 2% for the June quarter. Other net income drivers include a lower effective tax rate and higher revenues, especially in Global Consumer Banking.
The bank’s Global Consumer Banking business reported revenues of $8.5 billion, up 3% year over year, driven by revenue growth across all three regions. North American revenues increased 3% as strong growth in Citi-Branded Cards offset declines in deposit spreads in consumer retail banking.
Citigroup Chief Financial Officer Mark Mason said during the earnings call that the bank’s digital capabilities contributed to a 100% increase in net deposit inflows, with strong deposit growth from both the bank’s existing customers and new customers. The bank reported $1 billion in digital deposit sales for the June quarter and approximately $2 billion in deposit sales for the first six months of the year.
Revenue declines in Fixed Income and Equity Markets hamper results
Although the bank reported strong revenue growth in Global Consumer Banking, revenues in the Fixed Income and Equity Markets businesses declined 4% and 9%, excluding gains from the Tradeweb Markets Inc. (TW, Financial) initial public offering. Equity Markets revenues were hampered by lower client activity in cash equities and prime finance. Likewise, Fixed Income revenues were hampered by tightening credit spreads and challenging trading market, especially in rates.
Stock falls at market open
Citigroup opened at $71.73 at market open and traded at an intraday low of $70.08 Monday morning. At the intraday low, the stock was down 2.35% from Friday’s close of $71.77.
GuruFocus ranks Citigroup’s financial strength 4 out of 10 on several weak signs, which include a debt-to-equity ratio that underperforms 75.67% of global competitors and an equity-to-asset ratio that outperforms just 50% of global competitors. Additionally, the bank has increased its long-term debt by approximately $65.1 billion over the past three years.
Gurus with large holdings in Citigroup include Bill Nygren (Trades, Portfolio) and Jeff Ubben (Trades, Portfolio)’s ValueAct Holdings L.P.
Disclosure: No positions.
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