Breaking Down Citigroup’s (C) Q3 Earnings Report: Key Highlights and Analysis

Citigroup announced its third-quarter earnings on Friday morning, with impressive growth in institutional clients and personal banking resulting in higher-than-anticipated revenue and earnings per share.

Here’s a breakdown of Citigroup’s results compared to Wall Street expectations, based on a survey of LSEG analysts, formerly known as Refinitiv:

• Earnings per share: $1.63, or $1.52 excluding divestitures impact, surpassing the expected $1.21.
• Revenue: $20.14 billion, exceeding the expected $19.31 billion.

Revenue and net income increased by 9% and 2% respectively, year over year.

Citigroup’s institutional clients division reported a revenue of $10.6 billion, a 12% YoY increase and a 2% increase from the previous quarter. The bank highlighted that it achieved its best third-quarter performance in the past ten years in rates and currencies revenue.

In the meantime, the personal banking and wealth management division generated $6.8 billion in revenue, reflecting a year-over-year growth of approximately 10% and a 6% increase from the previous quarter.

“Despite the challenges, each of our five interconnected core businesses experienced revenue growth, resulting in an overall 9% growth,” stated CEO Jane Fraser in a press release.

Despite the better-than-expected results, the bank’s shares closed down 0.2% for the day. Citigroup’s stock has declined more than 8% this year.

JPMorgan and Wells Fargo, two other banks that reported their quarterly results on Friday morning, also exceeded revenue expectations.

Citigroup reported a total cost of credit of $1.84 billion at the end of the quarter, slightly higher than the $1.82 billion at the end of the previous quarter and $1.37 billion a year ago. This metric includes a net build of $125 million in the allowance for credit losses during the third quarter. According to FactSet’s StreetAccount, analysts predicted a total cost of credit of $1.96 billion.

“The global macro backdrop remains a story of desynchronization. In the US, recent data implies a soft-landing, but history would suggest otherwise and we are seeing some cracks in the lower [credit score] consumer. In the euro area and the UK, the picture turned distinctly more negative,” commented Fraser during an analyst call.

The earnings report includes the period during which Fraser announced the bank’s division into five main business lines, marking the latest change implemented by the CEO since assuming office in March 2021. Fraser mentioned on Friday that the changes should be finalized by early 2024 and bring about financial benefits in the future.

“While expense is not the primary driver of the organizational changes, they will help us start bending the expense curve in the fourth quarter of next year,” added Fraser.

The organizational restructuring, announced on September 13, 2023, is anticipated to involve job cuts. During Friday’s call, CFO Mark Mason declined to provide guidance on headcount.

Citigroup’s net interest margin for the quarter stood at 2.49%, surpassing the expected 2.41% from FactSet’s StreetAccount. Mason mentioned that the company foresees its net interest income for the full year of 2023 to slightly exceed previous guidance.

Another initiative under Fraser’s leadership has been the sale of Citi’s retail banking business in certain international markets. The most recent development in this regard occurred on October 9, when the bank announced the agreement to sell its onshore consumer wealth portfolio in China. Fraser stated on Friday that the bank expects to finalize the sale of its Indonesia consumer business in the fourth quarter.