Citigroup Inc (Citi) logo. (Reuters / Chris Hell Glen / file photo)
Citigroup announced on Friday that quarterly profits were 27% lower than expected. This is because the trading desks of the third largest banks in the United States have taken advantage of rising market volatility to ease the slump in investment banks.
Thanks to commodity and forex market volatility, market business revenues increased a quarter to $ 5.3 billion. This is a particularly strong segment for banks.
Now as customers are trying to rebalance their portfolios in the face of concerns that geopolitical tensions, rising inflation, and aggressive Fed tightening could put the economy in recession. Trading has emerged as a bright spot for quarterly Wall Street banks.
Citi’s stock was more than 4% higher in pre-market trading.
Bank profits for the quarter ending June 30 fell from $ 6.2 billion ($ 2.85 per share) in the year-ago quarter to $ 4.5 billion ($ 2.19 per share).
Excluding items, Citi earns $ 2.30 per share, which is higher than the average analyst estimate of $ 1.68 per share, according to Refinitiv’s calculations.
The decline in profits also reflects a potentially sour loss loan reserve increase of $ 375 million as the economic outlook diminished. A year ago, exceptional government stimulus and economic recovery from a pandemic released a $ 2.4 billion reserve.
This has pushed credit costs up to $ 1.3 billion. This is in contrast to the $ 1.07 billion profit of the previous year.
Investment banking revenues fell 46% to $ 805 million as market volatility depleted investment bankers’ underwriting and advisory fees that drove Wall Street’s profits during COVID-19. ..
Citi’s premier financial and trade solutions business saw revenues increase 33% to $ 3 billion, driven by higher net interest income and higher fees.
The bank, which disclosed its $ 8.4 billion exposure to Russia as of the second quarter, said it is considering options for withdrawing from the country’s consumer and commercial banking operations.
Citigroup, the most global US bank, was hit by Western sanctions against Russia following the invasion of Ukraine.