Citigroup earnings miss estimates on bond trading, mortgages

Citigroup Inc., the third-biggest U.S. bank, reported a $3.23 billion profit that missed analysts’ estimates as bond trading slumped 26% and U.S. mortgage revenue declined.

Third-quarter net income climbed from $468 million a year earlier, when the bank had a $2.9 billion loss on its brokerage joint venture, and earnings per share rose to $1 from 15 cents, the New York-based bank said today in a statement. Excluding one-time items, profit was $1.02 a share, two cents lower than the average estimate of 26 analysts surveyed by Bloomberg.

Chief Executive Officer Michael Corbat, 53, is eliminating jobs, closing branches and scaling back in some countries to counter weaker revenue from bond trading and a drop in mortgage refinancings. The fixed-income business, which accounted for about 20% of revenue last year, suffered along with home lending on concern the Federal Reserve would reduce monthly debt purchases that drove interest rates near record lows.

“Fixed income, currency and commodities trading is by far the biggest number for all investment banks, including Citi, and that was of course impacted by the seasonality of the quarter and the weakness in September,” Gerard Cassidy, an analyst at RBC Capital Markets, said in an interview on Bloomberg Television.

The shares fell 0.1% to $49.51 at 10:35 a.m. in New York. The stock rose 25% through yesterday, matching the advance for the 24-company KBW Bank Index.

Revenue, Expenses

Revenue excluding an accounting adjustment fell 5% from a year earlier to $18.2 billion. Expenses dropped 4% to $11.7 billion, according to the statement. Costs included $677 million for legal matters, a company presentation showed.

“While many of the factors which influence our revenues are not within our full control, we certainly can control our costs,” Corbat said in the statement. “I am pleased with our expense discipline and improved efficiency year-to-date.”

Fixed-income trading revenue excluding an accounting adjustment dropped to $2.78 billion, which compares with estimates of $3.04 billion from Moshe Orenbuch, an analyst at Credit Suisse Group AG, and $2.53 billion predicted by Cassidy at RBC.

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