Citigroup beats analysts’ estimates on investment banking

July 16 (Bloomberg) -- Citigroup Inc., the third-biggest U.S. bank, reported second-quarter profit that beat analysts’ estimates on revenue from advising on mergers and underwriting stocks and bonds.

Net income declined 12 percent to $2.95 billion, or 95 cents a share, from $3.34 billion, or $1.09, a year earlier, the New York-based bank said today in a statement. Excluding accounting adjustments and a loss from the sale of a stake in a Turkish bank, earnings were $1 a share, compared with the average estimate of 89 cents in a Bloomberg survey of 18 analysts.

Revenue from advising clients on mergers and acquisitions helped Chief Executive Officer Vikram Pandit, 55, manage declines in trading stocks and bonds amid fallout from the European sovereign-debt crisis. Citigroup’s 21 percent drop in investment-banking revenue was smaller than the 35 percent decline JPMorgan Chase & Co., the biggest U.S. bank, reported last week. Citigroup’s stock slid 25 percent during the period, the worst performance among the biggest U.S. lenders, as regulators struggled to contain the crisis in Europe.

“While Citigroup’s shares are again trading in line with broader euro zone developments, the company’s underlying fundamentals continue to evidence improvement,” Jason Goldberg, an analyst at Barclays Plc, wrote in a July 9 note to clients. The bank has “moved toward a more customer-driven model and run down its legacy problem assets, which should ultimately reduce its risk and free up capital.”

Expenses Drop

Revenue excluding the accounting adjustments and the sale of Akbank TAS in Turkey, was $18.8 billion, 7 percent lower than a year earlier, while expenses dropped 6 percent to $12.1 billion.

Citigroup rose to $27.16 in New York trading at 8:11 a.m. from $26.65 on July 13. The stock is up 1.3 percent this year through last week.

Revenue from advising clients on mergers and acquisitions rose 2 percent to $201 million from the same period last year. Richard Staite, a London-based analyst with Atlantic Equities LLP, had estimated $130 million. Fees from managing bond sales fell 21 percent to $486 million, a smaller drop than predicted by David Trone, an analyst at JMP Securities LLC., who estimated $331 million. Equity-underwriting fees tumbled 39 percent to $167 million.

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