Citigroup profit beats estimates on trading, deals windfall

[NEW YORK] Citigroup’s quarterly profit beat Wall Street estimates on Tuesday (Jul 15), as its traders brought in a windfall from turbulent markets and investment bankers gained from resilient dealmaking.

Stocks and bonds have whipsawed since April, when US President Donald Trump stunned markets by announcing sweeping tariffs against major trading partners. Volatility tends to help Wall Street trading desks as clients rush to adjust their portfolios.

“We reported another very good quarter and continue to demonstrate that our strong results are sustainable through different environments,” CEO Jane Fraser said in a statement. “We continue to be at the centre of some of the most significant transactions.”

The third-largest US lender’s net income was US$4 billion, or US$1.96 per share, in the three months ended June 30. Total net income rose 25 per cent from a year earlier.

Analysts on average had expected US$1.60 per share, according to estimates compiled by LSEG.

Markets revenue jumped 16 per cent to US$5.9 billion, its best performance since the second quarter of 2020.

Investment banking remained subdued for most of the quarter, as economic uncertainty and choppy markets made companies hesitant to pursue deals.

But a rebound in June, marked by a string of large IPOs and multi-billion-dollar buyouts, has fuelled optimism for the second half.

Citi’s investment banking fees climbed 13 per cent in the second quarter, while overall banking revenue increased nearly 19 per cent to US$1.9 billion.

Citi jointly led the US$1.05 billion IPO of stablecoin issuer Circle and the US$650 million listing of retail trading platform eToro. The bank also advised Charter Communications on its US$21.9 billion deal to buy privately held Cox Communications in May.

Equity capital markets fees climbed 25 per cent in the quarter driven by strength in convertibles and IPOs, while advisory fees surged 52 per cent.

Earlier on Tuesday, rivals JPMorgan Chase and Wells Fargo both beat Wall Street estimates for second-quarter profit.

Citi’s revenue rose 8 per cent in the quarter from a year earlier to US$21.7 billion, notching second-quarter records for its services, wealth and US personal banking businesses.

Financial industry executives have cited resilient IPO and deal pipelines as indicators that activity will pick up in the second half amid easing economic uncertainty.

Meanwhile, revenue in the wealth unit jumped 20 per cent. Citi executives have said that the business is a key growth area.

US personal banking revenues climbed 6 per cent in the second quarter, driven by higher interest-earning balances in credit cards.

Citi’s Wall Street businesses have gained in recent quarters after Fraser led a sweeping overhaul to boost profits. The banking division has also strengthened under Viswas Raghavan, who was hired from JPMorgan a year ago.

Still, the lender is working to address regulatory orders to fix longstanding deficiencies in its risk management, controls and data governance.

As part of those efforts, Citi retired 211 applications in the first half of the year, it said in a presentation. It also enhanced controls in 85 countries to detect “large, anomalous payments.”

The bank was hit by regulatory punishments known as consent orders in 2020 after it erroneously sent US$900 million to Revlon lenders.

The compliance issues have weighed on Citi’s stock, which continues to trade at a steep discount to its Wall Street peers, still below its book value.

Citi has narrowed the gap by growing its price-to-book ratio over the past year. It has 17 buy recommendations and five hold recommendations from analysts, according to data compiled by LSEG.

Citi shares have risen 24.3 per cent in the year to date, compared with a 6.6 per cent gain in the S&P  500 through Monday. REUTERS