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Citigroup profit beats estimates as Corbat shows cost discipline
[NEW YORK] Citigroup Inc, the third-largest US bank, posted profit that beat analysts' estimates as Chief Executive Officer Michael Corbat showed progress on cutting costs.
Second-quarter net income jumped to US$4.85 billion, or $1.51 a share, from US$181 million, or 3 cents, a year earlier, when the firm had US$3.7 billion in costs from settling a mortgage-bond probe, the lender said on Thursday in a statement. Excluding accounting adjustments and one-time items, profit was $1.45 a share, beating the $1.34 average estimate of 27 analysts surveyed by Bloomberg.
Mr Corbat is striving to meet financial goals set more than two years ago to measure his progress in transforming the firm, making it leaner and more profitable. He's sold businesses, exited consumer banking in more than a dozen markets and focused on his best customers.
Total revenue, excluding accounting adjustments, fell 1.5 per cent to US$19.2 billion from a year earlier, in line with analysts' estimates. Operating expenses slid 7.2 per cent to US$10.9 billion, the bank said. Citigroup had set aside about US$3.5 billion in the fourth quarter for investigations, severance and office closures in an effort to make 2015 results more predictable.
That absorbed costs when Citigroup settled probes in May into currency rigging, agreeing to pay US$925 million while its Citicorp unit pleaded guilty to a crime. Brazil's antitrust agency, South Korea and South Korea also have opened inquiries into whether firms colluded in foreign-exchange markets.
Mr Corbat has made headway on two of three financial goals set in March 2013, about five months after he took over from former CEO Vikram Pandit. Mr Corbat has promised to achieve a return on assets of 90 basis points to 110 basis points by the end of this year, and an efficiency ratio in the mid-50 per cent range for the core business.
A target for return on tangible common equity of 10 per cent was scrapped after the Federal Reserve rejected the firm's 2014 capital plan. The central bank approved the lender's subsequent plan this year, potentially saving his job.
Citi Holdings, the collection of unwanted assets the bank is selling, generated profit of US$163 million.