Despite Earnings Beat, Citigroup Is Just Par for the Course

Citigroup beats on earnings results as its bread-and-butter business shines

Citigroup Inc. said Thursday that its third-quarter revenue rose 2%, boosted by another jump in investment banking and progress in its evolving consumer bank.

Institutional Clients Group revenues grew 9% to $9.23 billion. Analysts were expecting the company to report earnings per share of $1.32 on revenue of $17.90 billion for the quarter.

Expenses dropped 2 percent. However, that decline was offset by a 16% increase in equity trading revenue.

Citi and JPMorgan are kicking off the earnings cycle for United States banks, which have for weeks been preparing investors for just such a blow to trading results.

JPMorgan Chase & Co JPM.N , the biggest US bank by assets, earlier on Thursday reported a better-than-expected quarterly profit, but said its bond trading revenue slumped 27 percent.

The bank's trading revenue, despite falling 11 percent, was better than the 15 percent decline Chief Financial Officer John Gerspach forecast three weeks ago. He said, in the end, September was better than anticipated.

After opening higher, Citi shares dipped 0.8% shortly after to US$74.33. Citigroup's shares have had a strong run-up this year, climbing 26 percent partly due to its share buyback plan.

Commenting on the lender's latest set of results, chief Michael Corbat said: "We had revenues in numerous products we have been investing in, tightly managed our expenses, and again saw loan growth in both our consumer and institutional businesses". Total consumer net profit fell 6 percent with income in its core North American market down 16 percent as provisions for bad debts rose.

Consumer credit is a cause for concern for the bank as Citigroup said its company-wide net credit losses rose 17 percent from a year earlier.

The store cards business has been grappling with less successful collection efforts after accounts become delinquent.

Global consumer banking saw revenues grow 3% from past year to $8.4 billion, but net income dropped by 6% $1.17 billion, which the bank attributed to higher cost of credit. The branded cards business has seen loss rates rise as some customers who the bank has added in recent years during a growth push have missed payments. Corbat's target for the measure of profitability is 10 percent in 2019 and 14 percent longer term.

Net income grew 8% year-over-year to $4.1 billion, beating estimates of $3.6 billion.

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