Citigroup beats profit estimates on trading boost

Citigroup Inc (N:C) trounced estimates for third-quarter profit on Tuesday, as this year’s rollercoaster ride for global financial markets drove a surge in the bank’s trading revenue, countering the impact of ultra-low interest rates.

Adding to the bullish message from bumper results from peer JPMorgan (NYSE:JPM), the bank reported respectively 18% and 15% jumps in revenue from bond and stock market trading and its shares rose around 2% after the release.

With a coronavirus-driven recession crushing consumer and business confidence, and with it demand for loans, Citi reported its first outright fall in revenue this year, down 7% to $17.3 billion.

But even allowing for the impact of a $400 million fine related to its mistaken transfer of $1 billion to lenders of Revlon Inc (N:REV), Citi’s total net income for common shareholders at $1.40 per share beat analysts’ expectations of 93 cents.

Analysts from brokerage Oppenheimer calculated that without the penalty, core operating earnings per share would have been $1.55.

The bank, set to exchange long-time Chief Executive Mike Corbat for Wall Street’s first woman CEO, Jane Fraser, early next year, faces a series of challenges with its retail business as recession grips American households.

Profit dropped by more than a third in the quarter as its credit card customers closed accounts and spent less. Revenue in North American branded cards, the growth engine for Citi’s consumer bank going into the year, tumbled 12%.

End of period open accounts dropped by 4% and purchase sales slid 10% and expenses rose 5%, primarily due to the $400 million fine for risk-and-control failures across the sprawling international bank. Executives have committed $1 billion to overhauling its operations systems.

The bank further boosted reserves for potential loan losses as coronavirus cases rise around the world crippling local economies. The third-largest U.S. bank by assets set aside an additional $314 million on top of the $15 billion it reserved in the first half of the year.