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.

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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