C Citigroup Inc

By Christina Rexrode 

Citigroup Inc. said Friday its second-quarter profit rose 16%, boosted by growing loans and flat expenses.

Quarterly profit at the New York-based bank was $4.49 billion, up from $3.87 billion a year earlier. Per-share earnings were $1.63. Analysts had expected $1.56 per share.

Revenue rose 2% from a year ago to $18.47 billion. Analysts had expected $18.51 billion.

Citigroup does business around the world. Chief Financial Officer John Gerspach said in a call with reporters that trade disputes have dampened the overall market, but haven't affected the bank.

That is partly because Citigroup helps companies trading throughout the world, not just those trading with the U.S. or based in the U.S. Mr. Gerspach said the bank has seen a big pickup in trade flowing between Asian countries, including China trading with South Korea.

"It's certainly had some impact in the overall feeling in the market, it's created some uncertainty, so I do think it's probably had some impact on people making decisions," Mr. Gerspach said, referring to trade and tariff disputes. "But from an overall business point of view we haven't seen that impact as of yet."

On a call with analysts, Chief Executive Michael Corbat was asked about the bank's large presence in emerging-market countries. He replied that the bank works with multinational companies in those markets, and that those clients would be able to realign their supply chains and trade routes if needed.

Second-quarter trading revenue fell about 1% from a year ago, to $3.94 billion. Mr. Gerspach said last month that trading revenue would be roughly flat in the second quarter.

Fixed-income trading was down 6%. The smaller equities trading unit, which Citigroup has been expanding, was up 19%. Mr. Gerspach said the decline in fixed-income trading came from a drop in spread products concentrated in the U.S.

JPMorgan Chase & Co., which also reported earnings Friday, increased trading revenue by 13%, growing both fixed-income and equities trading.

Citigroup's shares fell 2% in afternoon trading and are down about 10% this year, more than the 2% decline in the KBW Nasdaq bank index. On a call with analysts, bank executives fielded multiple questions about its efficiency goals.

Citigroup's efficiency ratio, or expenses as a percentage of revenue, for the year so far is about 58%, but it has ambitious goals for improvement: The bank wants to push the ratio to 57% for the full year, and to the low 50s by 2020. Bank executives expressed confidence that they could do both.

Shares for most big banks have been hurt by concerns that the Trump administration's trade tariffs and protectionist tone could crimp the economy.

Citigroup's backbone is the Treasury and Trade Solutions unit, which does back-office work for governments and companies that operate in multiple countries. So far, though, that unit continues to grow: Revenue rose 11% from a year ago.

Total loans were up 4%, driven by an increase in corporate loans. Citigroup's credit costs increased, which the bank said was due to loan growth and normal trends in consumer loans.

Total operating expenses were roughly flat. Citigroup cut spending on advertising and marketing but increased spending on technology and communication.

Citigroup and other banks have been helped by last year's tax law that slashed the corporate tax rate to 21% from 35%. Citigroup said its effective tax rate during the second quarter was 24%, down from 32% a year ago.

Activist investor ValueAct Capital Partners LP told its investors recently that it had bought a stake in Citigroup. So far, ValueAct hasn't called for significant strategic changes, and it has told its investors it supports Citigroup Chief Executive Michael Corbat.

Write to Christina Rexrode at christina.rexrode@wsj.com

(END) Dow Jones Newswires

July 13, 2018 14:44 ET (18:44 GMT)

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