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Citigroup’s profits fell more than a third last quarter, hit by slower corporate spending, a dearth of deals and a costly round of lay-offs.
The New York-based bank reported $2.9bn in net income, down from $4.5bn in the same period last year. Revenues dipped 1 per cent to $19.4bn in a quarter marked by mounting fears of a US recession.
Revenue in Citi’s large cash management and payment processing unit, which caters for corporations, was up just 15 per cent, less than half the 32 per cent growth in the same period last year.
Like its rivals, Citi was not able to escape the sharp slowdown in dealmaking. Revenue from corporate and investment banking tumbled 44 per cent in the quarter while fees from its markets business — trading stocks and bonds on behalf of clients — fell 13 per cent.
“In banking, the long-awaited rebound in investment banking has yet to materialise, making for a disappointing quarter,” Citi chief executive Jane Fraser said on Friday.
Its provision for loan losses in the quarter rose nearly 40 per cent to $1.8bn. Overall lending in the quarter was little changed from a year ago.
The weakness across several of its businesses led the bank to announce plans last month to cut as many as 5,000 staff. During the quarter, Citi’s expenses rose by more than $1bn, mostly tied to the lay-offs.
The bank’s performance was considerable worse that its rivals. Earnings at JPMorgan Chase and Wells Fargo, which both also reported results on Friday, jumped 67 per cent and 57 per cent respectively. Citi’s share price had fallen about 1 per cent by mid-morning in New York.
“They underperformed competitors this quarter,” said analyst Mike Mayo of Wells Fargo.
A still resilient US consumer, however, proved a bright spot for Citi. Revenue from Citi’s retail credit card business rose 27 per cent in the period, helping the bank’s overall profits beat Wall Street’s expectations.
Citi, like other big banks, continued to benefit from the rise in interest rates, though less than some of its rivals. Net interest income in the quarter rose 16 per cent from a year ago to nearly $14bn, compared with 44 per cent and 29 per cent at JPMorgan and Wells Fargo, respectively.
Citi upped its guidance on what it expect to make from interest income this year, but again less than rivals. Citi projected more than $46bn in interest income, up from an earlier forecast of $45bn.
Citi’s chief financial officer Mark Mason said on Friday that the bank was benefiting across its businesses from higher interest rates, but that Citi’s deposits, unlike rivals, is heavily weighted towards corporate accounts — which are more likely to move their excess deposits in search of yield.
Citi said the average yield it was paying depositors rose to just over 3 per cent, up from about just over a half a per cent a year ago. Citi, unlike other banks, did not see an outflow of deposits in the quarter.
Citi is still battling to regain its footing a decade and a half after the financial crisis. Fraser, who took over in 2021, has led the bank through a restructuring, pulling Citi out of underperforming businesses and closing retail branch networks around the globe in an effort to reduce costs.
However, Citi was the only big bank told it needs to increase its capital buffer as a result of this year’s Fed stress tests, which were released earlier this month. Citi’s own stress test, unlike other banks, showed that it would do better in a downturn than the Fed predicted.
Mason said Citi had contacted the Fed to determine why regulators thought its market business would perform worse in a downturn than the bank projected, which was the source of the discrepancy.
“We are not contesting the results, but we do want to understand,” said Mason on Friday.
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