Citigroup Q2 Earnings Beat Estimates Bolstered By Stronger Consumer Business

Citigroup Earnings Report
A woman uses an ATM inside a Citi bank branch in New York (Photo: Retuers / Lucas Jackson)

Citigroup just released its second-quarter earnings report this week. The New York-based bank managed to beat analysts' expectations with numbers bolstered by drastic cost reductions and a strengthening of its consumer lending business.

The United States' third-largest bank is the first major bank to report its second-quarter earnings. The numbers it reported managed to raise investor sentiment, increasing the outlook for the future reports by other major banks. Other Wall Street banks such as JPMorgan Chase & Co, Goldman Sachs Group, and Bank of America are expected to release their second-quarter reports within the week.

Citigroup's report is expected to slightly boost bank stocks, which have lagged in recent weeks due to increased concerns over net interest margins. The company's interest margin experienced a slight decline from 2.70 percent to 2.67 percent.

However, this was offset by an increase in earnings from the company's lending activities and an increase in its net interest income by 2 percent.

The company's overall revenue for the quarter rose by 2 percent to $18.76 billion.

This was mostly bolstered by a 4 percent growth in the company's consumer business including its credit card services. Branded card revenues jumped by 7 percent, while interest-earning balances increased by 10 percent.

The overall strengthening of the bank's consumer sector managed to lift up its declining business and corporate banking unit. Trading revenues fell for the third consecutive quarter, with fixed-income trading dropping by 4 percent. The bank's equities revenues for the quarter had dropped by 9 percent. Corporate lending also fell by 9 percent. The company's overall loans rose by 3 percent to a total of around $689 billion. Deposits increased by 5 percent, taking into consideration foreign exchange fluctuations.  

According to the bank's chief financial officer, Mark Mason, the drop in its trading business can be attributed to the recent escalations in trade tensions. The current geopolitical climate has apparently discouraged some of its corporate customers from taking out loans. Mason added that the company saw a decline in activities in Asia as corporate clients continue to exercise caution.

Citigroup's net income rose by $1.95 per share to $4.8 billion for the second quarter. This was a slight increase from $4.5 billion during the same quarter last year, beating analysts' expectations of a profit of $1.80 per share.

The better than expected results were bolstered by the bank's recent cost-cutting plans, which Mason revealed, was to cope with potential headwinds. The result of the company's cost-cutting reduced its overall expense for the quarter by 2 percent. This placed the firm on track for the year for its projected $500 million to $600 million in annual savings. 

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