FILE PHOTO - FILE PHOTO -- People walk beneath a Citibank branch logo in the financial district of San Francisco, California, U.S. on July 17, 2009. REUTERS/Robert Galbraith/File Photo
NEW YORK: Citigroup Inc reported a higher-than-expected quarterly profit as the bank’s fixed-income trading was boosted by clients adjusting their positions following rate hikes by the Federal Reserve and changes in the forex and credit markets.
US banks have been benefiting from a jump in markets-related revenue following the rate hikes, as well as elections in Europe and Britain’s progress in leaving the European Union.
A surge in trading activity also helped JPMorgan Chase & Co, the biggest US bank by assets, report a nearly 17% rise in quarterly profit earlier in the day.
“The momentum we saw across many of our businesses towards the end of last year carried into the first quarter, resulting in significantly better overall performance than a year ago,” Citigroup’s chief executive Michael Corbat said in a statement.
The company reported a 17% jump in quarterly profit to US$4.09bil (RM18.03bil), or US$1.35 per share, beating analysts’ average estimate of US$1.24 per share, according to Thomson Reuters I/B/E/S.
Total revenue rose about 3% to US$18.12bil (RM79.87bil), topping the average estimate of US$17.76bil (RM78.35bil).
Revenue from fixed-income trading rose 19% to US$3.62bil, while the bank’s much smaller equities trading saw revenue increase 10% to US$769mil. Gains in fixed-income trading came with additional volume in interest rate and credit products, as well as foreign exchange.
Combined, trading revenue jumped about 17%, higher than the “low double-digit” rise that chief financial officer John Gerspach projected five weeks ago.
Bond market conditions can have a big impact on Citigroup’s bottom line because of its business mix.
In 2016, fixed-income trading and debt underwriting together produced nearly US$16bil of Citigroup’s US$70bil of total revenue.
The ratio of expenses to revenue was about 58%, in line with the company’s goal for this year.
Citigroup said return on tangible equity, a key measure of profitability, was 8.5%, up from 7.3% a year earlier.
In late 2019, the company might reach 10%, Gerspach said in January.
Citigroup’s return on tangible equity is dragged down by accounting for some of its deferred tax assets, or DTAs, leftover from the financial crisis.
The company’s shares were up little changed at US$58.40 in premarket trading.
Through Wednesday’s close, the stock had risen about 17% since the US presidential elections, but is down 1.6% so far this year.
The elections sparked a rally in US bank stocks as investors bet on lower taxes and easing regulations. But, the rally is losing momentum as investors scale back expectations for any quick changes. - Reuters
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