Citigroup Inc. C 0.77% said Thursday its third-quarter profit rose 48%, after the bank released some of the money it had set aside for bad loans early in the pandemic.
The bank reported a profit of $4.64 billion, or $2.15 per share, up from $3.15 billion, or $1.36 a share, a year earlier. That beat the $1.71 per share that analysts had expected, according to FactSet.
Revenue fell 1% to $17.15 billion, better than the $16.98 billion analysts expected. Excluding the sale of its Australian consumer business, revenue would have been up 3%.
In the institutional clients group, strong investment banking offset a drop in trading, and revenue rose 4% to $10.79 billion. In the consumer bank, revenue fell 13% to $6.26 billion, hit by the Australian deal.
Citigroup freed up $1.16 billion it had set aside last year to cover loan defaults. A year ago, the bank was still building up reserves and took a more-than $2 billion charge on credit. JPMorgan Chase & Co., Bank of America Corp. and Wells Fargo & Co. also released some of their rainy-day funds, boosting quarterly profits.
Citigroup’s results are heavily tied to Wall Street, which enjoyed some of its best quarters ever in the past year. Businesses called on Citigroup bankers to help raise cash, sell bonds and strike deals, while buoyant markets led to active trading.
Investment banking fees were up 39%, with a record pace for global mergers powering advisory fees to $539 million, more than triple the prior year. Debt underwriting and equity underwriting fees rose 19% and 5%, respectively.
But trading volumes have slowed down for fixed-income assets, as expected, denting third-quarter results across the industry. Citigroup’s trading revenue fell 5%, matching rival JPMorgan. Citigroup fixed-income revenue fell 16%, while equities revenue rose 40%.
Low interest rates and a persistent lack of loan growth stung Citigroup’s consumer bank. Spending on Citigroup credit cards rose 20% from a year ago and continued increasing from the summer. But customers continued to pay off the charges, and card loans fell 2% from a year ago.
The profit the bank makes on lending, known as net interest income, fell 1% to $10.4 billion in the quarter. Total loans were flat from the prior year and down from June.
Chief Executive Jane Fraser, in her eighth month on the job, is working on strategic plans to boost Citigroup’s profitability and to answer regulators’ demands that the bank improve its risk-management systems. That work has put a spotlight on the bank’s expenses, which rose 5%, in line with expectations.
Shares rose 0.8% Thursday. The stock is underperforming rival big banks this year, up about 15%.
Bank earnings
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Appeared in the October 15, 2021, print edition as ‘Citi Earnings Soar 48% as Rainy-Day Cash Is Freed.’
