Citigroup reported a 40% increase in third-quarter profit to $5.25 billion, driven by investment banking and wealth management. Trading revenue fell sequentially amid market volatility.
Citigroup reported a 40% increase in third-quarter profit to $5.25 billion, or $2.85 per share, for the three months ended September 30. The result beat the average analyst estimate of $2.66 per share, according to data compiled by LSEG. The bank cited stronger investment banking revenue, transactions with multinational companies, and higher earnings from wealth management as key drivers.
Investment banking revenue rose 9% from a year ago to $1.35 billion. However, this figure fell 13% compared to the previous quarter as equity and debt underwriting activity slowed. Global investment banking revenue exceeded $90 billion in the first nine months of the year, with Citigroup ranking fifth among global banks by fees, according to Dealogic.
The broader market environment remained volatile. The conflict in Iran pushed oil prices higher, fueling inflation and prompting the U.S. Federal Reserve to raise interest rates. This led to a dramatic sell-off in bond markets worldwide. Brian Mulberry, chief market strategist at Zacks Investment Management, stated, "There is no doubt that high interest rates and the threat of continued Fed hikes is weighing on trading and IB activity in a measurably negative vector."
Trading revenue rose 6% year-over-year to $6.11 billion, with equities trading up 14% and fixed-income trading up 4%. However, trading revenue fell 27% against the previous quarter, primarily due to a drop in equity trading revenue. Citigroup CEO Jane Fraser noted that while activity decelerated from record volumes in previous quarters, the pipeline for M&A, debt refinancing, and equity issuance remains strong.
The Services division recorded the highest growth among Citigroup’s five businesses, with revenue up 15% and profit up 27%. Wealth management also saw revenue grow by 15%, with client assets increasing by the same percentage. Banking revenue, which includes corporate lending, rose 6% to $1.74 billion.
In contrast, profit from credit cards fell 8% from a year earlier. This decline occurred despite clients spending 13% more and taking on 9% higher loan volumes. The drop was attributed to higher reward costs, payments to partners, and increased credit provisions. Loss provisions in the U.S. consumer cards segment totaled $1.9 billion, up 4% from a year ago. Chief Financial Officer Gonzalo Luchetti described the reserve increases as a deliberate precaution, stating, "We think it reflects prudence and helps us solve for a range of potential macro outcomes in a dynamic environment."
Citigroup posted an 11.5% return on tangible common equity (ROTCE) in the third quarter and a year-to-date return of 12.6%, exceeding its 11% target. Fraser said in a statement, "We expect to exceed this year’s return target, even as we pull forward investments toward our 11-13 per cent near-term goal — the next waypoints on our path to sustainable returns of 14-15 per cent."
The bank returned $4.1 billion to shareholders through buybacks and dividends in the third quarter, bringing cumulative share repurchases to $13.3 billion this year. Citigroup is nearing the end of a multi-year restructuring that involved selling international businesses and addressing compliance deficiencies. The final divestment is its Mexican unit, Banamex, in which Citigroup now owns 51%. The bank expects to remove Banamex from its balance sheet and list it on the stock exchange next year.
Citigroup’s results highlight the divergent performance across banking sectors amid macroeconomic uncertainty. While investment banking and wealth management provided significant growth, trading revenues faced headwinds from rising interest rates and geopolitical tensions. The bank’s ability to exceed return targets and continue shareholder returns signals confidence in its restructuring efforts, even as it navigates a challenging environment for capital markets and consumer credit.
Sources
This article was drafted with AI assistance and checked against the sources above. Company claims are reported as claims. Cover image is AI-generated.
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