July 14 (Reuters) – Citigroup (CN) topped analysts’ estimates for second-quarter earnings on Friday, as higher borrower interest payments partially offset the blow to its Wall Street businesses from a trade slump.
The bank’s net profit fell 36% to $2.92 billion, or $1.33 per share, in the three months ended June 30. Earnings were depressed by higher layoff costs and increased loan loss provisions, the bank said.
In the markets, “clients were sidelined in April as the debt ceiling expired,” CEO Jane Fraser said in a statement. Meanwhile, “the long-anticipated uptick in investment banking has yet to materialize, making for a disappointing quarter.”
Market revenue fell 13% to $4.6 billion, while investment banking costs fell 24% to $612 million.
The decline in Citi’s net income contrasted with higher earnings at JPMorgan Chase (JPM.N), which earned more from interest payments and benefited from the purchase of First Republic Bank, and Wells Fargo (WFC.N).
Citi’s net interest income (NII) rose 18% at the most global US lender, mirroring gains at JPMorgan and Wells Fargo. NII measures the difference between what banks earn on loans and pay out on deposits.
The results come amid rising expectations that the Federal Reserve’s hefty rate hikes that have boosted the profits of major US banks over the past few quarters may be nearing an end. Citigroup raised its full-year NII guidance by $1 billion.
“The US economy is proving to be quite resilient, with strong balance sheets on both the consumer and corporate sides,” CFO Mark Mason told reporters on a conference call.
Default rates on credit cards and other retail lines are rising and are expected to reach “normal levels” by the end of the year, he said.
Citi posted double-digit revenue growth in both its services unit and treasury and trade solutions (TTS), a business executives have called the company’s crown jewel.
Excluding one-time items, Citi earned $1.37 per share, more than the $1.30 analysts expected, according to data from Refinitiv IBES.
Mason said the bank has not yet made a decision on potential share buybacks in the third quarter in light of rising capital requirements from the Federal Reserve.
Citigroup is in talks with the Fed to better understand changes that have led to a higher capital buffer after it passes an annual health check. Citi is not fighting the Fed, but trying to understand methodological changes, he added.
Shares of the New York-based lender fell 2.5%. JPMorgan and Wells Fargo rose slightly.
Reporting by Mehnaz Yasmin in Bengaluru; Edited by Sriraj Kalluvila, Lananh Nguyen and Nick Zieminski
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