Citigroup profit beats estimates on reserve release

[NEW YORK] Citigroup beat market estimates for third-quarter profit on Thursday (Oct 14), as the bank released loan loss reserves and reaped a windfall of fees from equity underwriting and investment banking advice.

For the three months ended Sept 30, net income jumped 48 per cent to US$4.6 billion, or US$2.15 per share, from US$3.1 billion, or US$1.36 per share, a year earlier. Analysts on average had expected a profit of US$1.65 per share, according to Refinitiv IBES data.

The bank's profits were buoyed by its decision to take down US$1.16 billion of loss reserves built during the pandemic for potentially sour loans that have not materialised. A year earlier, Citigroup had added US$436 million to its reserves.

Investment banking revenue increased 39 per cent to US$1.9 billion, helping offset a 16 per cent decline in fixed-income revenue from a year earlier when there was unprecedented volatility in the markets.

Higher expenses and lower net interest revenue weighed on results as did customers using their stimulus cheque to pay down their credit card loans.

"I am quite pleased with US$4.6 billion in net income given the environment we are operating in," chief executive officer Jane Fraser said in the results announcement.

Operating expenses increased 5 per cent to US$11.5 billion as the company ramped up spending on technology and personnel to improve its control systems to comply with demands made by regulators a year ago.

Net interest revenue declined 1 per cent from a year earlier, but was 2 per cent more than in the second quarter, suggesting an end to the downward trend that started when the pandemic began and the Federal Reserve cut interest rates to near zero and many borrowers paid down their loan balances.

Lower interest rates also hurt Citigroup's Treasury and Trade Solutions business, which saw revenue decline 4 per cent even as it collected more fees and saw growth in trading.

The results included the impact of a loss on the previously announced sale of its Australia consumer banking business.

Excluding the loss on the sale, revenue increased 3 per cent, driven by the institutional business.

REUTERS