by Citigroup (C) posted a smaller-than-expected decline in third-quarter profit thanks to gains at the investment bank, sending its shares up more than 2% in pre-market trading Tuesday.
Dealmakers at the third-largest U.S. lender joined rivals JPMorgan Chase and Wells Fargo in benefiting from a rebound in capital markets as corporate clients issued more debt and equity securities.
Investment banking was a bright spot for the second straight quarter, with revenue jumping 31% to $934 million. Wall Street executives are optimistic that the Federal Reserve’s interest rate cut last month will pave the way for more deals and IPOs.
“In a pivotal year, this quarter provides ample evidence that we are moving in the right direction and our strategy is gaining traction,” CEO Jane Fraser said in a statement.
Total operating expenses decreased 2% in the third quarter.
Citi’s total allowance for credit losses was about $22.1 billion at the end of the quarter, compared with $20.2 billion a year earlier.
That led its net income to fall to $3.2 billion, or $1.51 per share, from $3.5 billion, or $1.63 per share, a year earlier.
It still far exceeded analysts’ average expectations, which were $1.31 per share, according to estimates compiled by LSEG.
Services revenue climbed 8% to $5 billion, fueled by a 24% rise in securities services revenue to $1.4 billion.
A stock market rally late in the quarter propelled equity trading revenues up 32% to $1.2 billion, increasing overall markets revenues by 1%.
But revenue from bond trading lagged, falling 6% to $3.6 billion.
In the U.S. retail banking division, revenue climbed 3% to $5 billion, supported by 8% growth in credit card revenue to $2.7 billion.
Meanwhile, revenues at retail banks fell 8%, and in the retail services arm managing credit card partnerships, revenues fell 1%.
Its wealth management division, a key part of Fraser’s growth strategy, reported revenue growth of 9% during the quarter, to $2 billion.
Fraser sought to increase profits, simplify the company and resolve its long-standing regulatory problems.
Bank of America’s third-quarter profit fell on Friday due to lower interest income. Profits at rivals JPMorgan Chase and Wells Fargo beat estimates last week, supported by strong consumer finances.
Regulatory Efforts
In 2020, the Office of the Comptroller of the Currency and the Federal Reserve fined Citi $400 million and ordered the bank to address ongoing failures in risk management and data governance.
Earlier on Tuesday, Reuters reported that Citi had struggled to adequately train its employees in risk, compliance and data functions, citing the bank’s own assessment, shedding light on why it took years to resolve regulatory problems even as billions are spent on an overhaul.
Regulators fined Citi again in July for not making enough progress on these issues. That came as some relief when the Federal Reserve earlier this month ended a 2013 enforcement action regarding the bank’s anti-money laundering programs.
Citi is paying particular attention to data, an area “where we felt like we weren’t moving fast enough,” Chief Financial Officer Mark Mason told investors in September.
The company tasked chief technology officer Tim Ryan with working alongside chief operating officer Anand Selva to resolve the bank’s long-standing data management issues. The bank also added a section to quarterly filings to address its work on multiple regulatory sanctions, known as consent orders.
Citi shares have gained 28% so far this year, while an index that tracks large-cap banks is up 25% and the S&P 500 index has climbed 23% over the same period.
(Reporting by Tatiana Bautzer in New York and Manya Saini in Bangalore, editing by Lananh Nguyen and Devika Syamnath)
