Citigroup Earnings Lifted by Growing Loans -- 4th Update
July 13 2018 - 2:59PM
Dow Jones News
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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