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Citigroup profit beats estimates on gains in consumer lending

[BENGALURU] Citigroup beat analysts' estimates for quarterly profit on Monday, as a tight lid on costs and strength in consumer lending helped the third-largest US bank counter weakness in its trading business.

New York-based Citi is the first major bank to report second-quarter earnings. Wall Street titans JPMorgan Chase & Co, Bank of America Corp and Goldman Sachs Group Inc are scheduled to report later in the week.

Citi shares were up 0.8 per cent in premarket trading.

Bank stocks have been falling in recent weeks amid concerns that their net interest margins, or the difference between what they pay on deposits and earn on loans, have been squeezed by falling interest rates. Citi's interest margin declined slightly to 2.67 per cent from 2.70 per cent a year earlier and 2.72 per cent in the first quarter of 2019.

Citi continued to add loans and deposits in the most recent quarter, allaying concerns that a weaker economic outlook was hurting consumers' ability to borrow.

Total loans at the third-largest US bank by assets rose 3 per cent to US$689 billion, while deposits increased 5 per cent to US$1.05 trillion, excluding foreign exchange fluctuations.

Trading revenue remained challenged. Fixed-income trading fell 4 per cent, excluding a gain from Citi's investment in Tradeweb, while it declined 9 per cent at its equities business.

Executives at leading US banks had warned that trading revenue would be hit by a slump in client activity due to burgeoning trade tensions and uncertainties around Britain's planned exit from the European Union.

"We navigated an uncertain environment successfully by executing our strategy, and by showing disciplined expense, credit and risk management," chief executive officer Michael Corbat said in a statement.

A key was that the bank was able to make more money from its lending activities during the quarter. Net interest income rose 2 per cent.

Net income rose to US$4.80 billion, or US$1.95 per share, in the second quarter, from US$4.50 billion, or US$1.63 per share, a year earlier. The quarter included a one-time gain of 12 US cents per share related to the investment in electronic trading company TradeWeb.

Revenue rose 2 per cent to US$18.76 billion, while expenses fell 2 per cent.

Analysts had expected a profit of US$1.80 per share and revenue of US$18.50 billion, according to IBES data from Refinitiv.

One of the broadest measures of performance improved dramatically as Citi posted a return on tangible common equity of 11.9 per cent, up more than a percentage point from a year earlier.