Citigroup profit rise beats estimates as stock trading gains

Citigroup Inc. (NYSE:C), the third-biggest U.S. bank by assets, posted a 42% increase in second-quarter profit that beat analysts’ estimates as stock-trading revenue surged and losses on unwanted assets declined.

Net income climbed to $4.18 billion, or $1.34 a share, from $2.95 billion, or 95 cents, a year earlier, the New York-based bank said today in a statement. Excluding an accounting adjustment, earnings were $1.25 a share, beating the $1.18 average estimate of 27 analysts surveyed by Bloomberg.

Chief Executive Officer Michael Corbat, 53, has fired thousands of workers and scaled back operations in some countries to cut costs since replacing Vikram Pandit, 56, in October. Citi Holdings, the unit created in 2009 as a home for the company’s unwanted assets after the financial crisis, posted its smallest loss ever.

“Citi has done a good job of de-risking its business by pulling out and cleaning up the Citi Holdings assets,” said Marty Mosby, an analyst with Guggenheim Securities LLC. “The critical element for long-term value creation is still a continued lessening of the drag from Citi Holdings.”

Citigroup posted a $274 million loss in the second quarter of 2012 from the sale of some of its stake in Akbank TAS, a Turkish bank, benefiting this year’s profit comparison.

Revenue Gain

Revenue climbed 8% to $20 billion excluding the accounting adjustment and the Akbank transaction. Expenses rose 1% to $12.1 billion due to “higher legal and related costs,” according to the statement.

Shares of the company advanced 1.9% to $51.75 at 9:58 a.m., and gained 28% this year through July 12.

JPMorgan Chase & Co., the biggest U.S. bank, reported profit on July 12 of $6.5 billion, or $1.60 a share. Wells Fargo & Co., the fourth-biggest, posted $5.52 billion, or 98 cents a share.

Revenue at Citigroup’s stock-trading business, run from London by Derek Bandeen, increased 68% from a year earlier to $942 million. Richard Staite, an analyst with Atlantic Equities LLP, predicted $634 million, and Moshe Orenbuch with Credit Suisse Group AG estimated $835 million.

JPMorgan’s stock-trading revenue for the period was $1.3 billion, a 24% increase.

Citigroup continued winding down and selling unwanted investments in the Citi Holdings unit, which contains a consumer-finance business and billions of dollars of U.S. mortgages. Assets in the division fell 31% to $131 billion. Losses narrowed to $570 million from $910 million a year earlier.

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