Earnings

Citigroup Beats Earnings Expectations, But Misses On Revenue

It was a better than expected showing when Citibank reported, with earnings coming in stronger than anticipated, buttressed by a lower corporate tax rate.

According to reports, earnings clocked in a $1.73 per share in the third quarter of 2018, better than the $1.69 predicted. Citigroup also noted its effective tax rate fell to 24 percent in the third quarter from 31 percent a year earlier. That pushed third-quarter profit up 21.8 percent on a year-over-year basis.

Revenue, however, slightly missed analyst expectations, clocking in at $18.389 billion instead of the $18.501 billion forecast.

Net interest margin, a popular measure of bank profitability, clocked in at 2.7 percent, in line with expectations.

Citibank also reported loans were up 3 percent to a total of $675 billion by the end of the quarter. Deposits also saw an increase, going up 4 percent to $1.005 trillion.

Hindrances to revenue growth were reportedly found within Citigroup’s Institutional Clients Group business, where sales were down 2 percent to $9.2 billion from Q2, but up 2 percent from 2017. Bond trading revenue was looking strong, up 4 percent from Q2 and 9 percent from last year to $3.2 billion. Strength in that market balanced out a 16 percent year-on-year decline in investment banking revenue.

Strong spots were seen globally, as consumer banking revenue in Latin America was up 8 percent. The North American card business also saw strong yields, pushed by a host of promotional credit cards shifting out of their long “no APR period” to interest-generating vehicles.

Chief Financial Officer John Gerspach called out the changeover in the cards’ status as evidence that the promotional strategy is paying off, as interest-earning balances grew 7 percent and net interest revenue as a percentage of loans in a core portfolio rose to 8.51 percent from 8.28 percent during Q2.

“That is a good indicator of the future for this business,” Gerspach noted.

Citigroup’s stock is still in the red for the year, down 6 percent since the beginning of 2018. Its chief rival, JP Morgan Chase, by comparison, has seen its stock price grow (slightly) since the start of the year by about 2 percent.

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