Citigroup profit beats estimates on investment banking boost

CITIGROUP’S profit was broadly steady and beat third-quarter estimates as it benefited from rising interest payments and surging investment banking fees.

CFO Mark Mason said in a call with reporters that the reorganisation plan will result in a 15 per cent reduction in functional roles for its top two layers of management. The first phase of the plan eliminated 60 net committees, the bank said.

Citi’s net income rose 2 per cent to US$3.5 billion from a year ago, while earnings per share remained stable at US$1.63. On an adjusted basis, it earned US$1.52 to beat LSEG estimate of US$1.21.

Revenue at Citi’s institutional clients group that houses its Wall Street operations rose 12 per cent from a year ago, fuelled by a 34 per cent jump in investment banking fees. The gains were a bright spot after several quarters of depressed dealmaking.

The bank’s trading unit also boosted revenue, while its division providing treasury and securities services to corporations brought in 12 per cent more revenue.

Revenue from fixed income trading grew 14 per cent to US$3.6 billion, which more than offset a 3 per cent drop in equities trading revenue.

Citi’s overall revenue climbed 9 per cent to US$20.1 billion.

The third largest US lender set aside more money to cover potential bad loans, even though delinquency levels were still low compared with historical levels.

Citi’s total provision for the credit portfolio rose to US$17.6 billion from US$16.3 billion a year ago.

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At the same time, lenders have benefited from the Federal Reserve’s campaign to quell inflation, which has increased borrowing costs and helped banks earn more from customer interest payments.

Revenue for the personal banking and wealth management division jumped 10 per cent to US$6.8 billion. Deposits at the end of the third quarter came in at US$1.3 trillion, down 3 per cent from a year ago as customers moved to high-yielding assets.

CEO Jane Fraser announced a sweeping reorganiation last month that will disband Institutional Clients Group (ICG) and give her more direct oversight over the company’s businesses. The new structure is not yet reflected in the third-quarter results.

“We announced consequential changes that align our organisational structure with our strategy and changes how we run the bank,” Fraser said in a statement.

“When completed, we will have a simpler firm that can operate faster, better serve our clients and unlock value.”

Citi has not yet announced the expected headcount reduction and savings with the reorganisation that will reduce management layers and prompt layoffs across its businesses.

Fraser has said there was “no room for bystanders” as the bank embarked on its biggest overhaul in almost two decades. The changes are being rolled out at a time of economic uncertainty that has weighed on some of Citi’s key businesses like trading.

Expenses rose 6 per cent to US$13.5 billion due to rising costs and investments in control systems. The expenses included severance payments for employees who were laid off during the sale of its international businesses.

Rivals Wells Fargo and JPMorgan Chase also reported higher quarterly profit on Friday (Oct 13), boosted by a rise in interest payments. REUTERS