Citigroup profit sinks 27% on loan loss provisions, dealmaking slump

Citigroup posted a 27 per cent decline in second-quarter profit on Friday as the third-largest US bank added reserves for potentially sour loans and its investment banking business took a hit from a slowdown in corporate dealmaking.

Profit fell to US$4.5 billion, or US$2.19 a share, in the quarter ended June 30, from US$6.2 billion, or US$2.85 a share, a year earlier.

Analysts on average had expected a profit of US$1.66 per share, according to Refinitiv IBES data. It was not immediately clear if the reported numbers were comparable with estimates.

Credit costs rose to US$1.3 billion, a sharp contrast to the US$1.07 billion benefit a year earlier.

The shift came as the bank added US$375 million to its loan-loss reserves in the face of growing recession fears. A year earlier, exceptional government stimulus and the economy's recovery from the pandemic had allowed it to release US$2.4 billion of reserves.

Concern around a potential US recession has deepened in recent months as an unabating rise in inflation pushes the Federal Reserve to aggressively hike interest rates, increasing market volatility.

The market moves have dried up underwriting and advisory fees for investment bankers who drove Wall Street's profit during the depths of Covid-19. Investment banking revenue fell 46 per cent to US$805 million in the quarter.

But strong results in trading provided an offset with a 25 per cent jump in revenue to US$5.3 billion as Citi cashed in on the volatility across assets, especially fixed income, commodities and foreign exchange, a particularly strong segment for the global bank.

The Treasury and Trade Solutions business - Citi's crown jewel - posted a 33 per cent jump in revenue to US$3 billion thanks to higher net interest income and fee growth. REUTERS

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