October 21, 2020

Citigroup reports 3rd-quarter earnings that beat profit and revenue estimates amid trading surge

http://feedproxy.google.com/~r/typepad/alleyinsider/silicon_alley_insider/~3/5ZcRNDpzLto/citigroup-stock-price-earnings-q3-report-beat-coronavirus-economic-recovery-2020-10
Citi New York Coronavirus
People walk past a Citibank branch of Citigroup in New York. Profit plummeted at the bank because of COVID-19 pandemic.

  • Citigroup on Tuesday reported second-quarter earnings that beat analyst estimates for revenue and profit.
  • The bank’s trading desks failed to offset its struggling consumer banking arm, but performed well enough to surprise Wall Street to the upside.
  • Citi shares gained as much as 2% in early Tuesday trading.
  • Watch Citigroup trade live here

Citigroup reported third-quarter results on Tuesday that beat estimates for revenue and profit.

The bank’s trading division once again offset a slump in profits driven by near-zero interest rates and reserve build-ups. Revenue fell 7% from the year-ago period as thriving trading desks fell short of offsetting a consumer banking slump. Increased loan-loss reserves led net income to tank 34% from the year-ago period.

Citigroup shares gained as much as 2% in early Tuesday trading.

Here are the key numbers: 

  • Revenue: $17.3 billion, versus the $17.2 billion estimate from analysts surveyed by Bloomberg
  • Adjusted earnings per share: $1.40 per share, versus the 92 cent estimate
  • Net income: $3.2 billion, versus the $1.8 billion estimate

Read more: The global investment strategist at a $44 billion ETF shop explains why the pandemic-fueled boom of online retail is set to accelerate – and shares 5 stocks to watch other than Amazon ahead of its Prime Day

Global Consumer Banking revenues fell 13% to $7.2 billion as client spending remained stifled. 

“We continue to navigate the effects of the COVID-19 pandemic extremely well. Credit costs have stabilized, deposits continued to increase, and revenues are up 3% year-to-date,” CEO Michael Corbat said in a statement. “Although Global Consumer Banking revenues remained lower as a result of the pandemic, we did see higher activity in our mortgage and wealth management products.”

Net credit losses climbed roughly 200% from the year-ago period to $329 million. The bank’s reserves for soured loans grew 111% from the year-ago period to $26.4 billion, or 4% of loans.

The bank’s third-quarter figures reveal continued strength as the financial sector rebounds from the pandemic’s economic fallout. The quarter saw the US relax more lockdown measures before a second wave of infections prompted some fears of resumed quarantines. Several gauges of economic growth moderated their pace of improvement, leaving some looking to Congress to reinvigorate the recovery with another stimulus measure.

Citi’s second-quarter results bore the brunt of the coronavirus’ hit, with net income contracting 73% from the year-ago period. Still, earnings and revenue beat expectations as the company’s outperforming trading desks offset losses in its consumer banking arm.

The Tuesday report kicks off an earnings season set to reveal how companies performed through the slowing bounce-back. JPMorgan – the first major bank to report – beat expectations for revenue and profit over the period as the rebound in global markets boosted earnings.

Goldman Sachs and Bank of America are slated to report earnings on Wednesday, followed by Morgan Stanley on Thursday.

Citi closed at $45.88 per share on Monday, down roughly 42% year-to-date.

Now read more markets coverage from Markets Insider and Business Insider:

Popular video game platform Roblox announces public offering that could value the company at $8 billion

Tesla’s 425% surge this year ignores fundamentals more than any other stock rally in history, Needham says

‘The largest financial crisis in history’: A 47-year market vet says the COVID-19 crash was merely a ‘fake-out sell-off’ – and warns of an 80% stock plunge fraught with bank failures and bankruptcies