Citigroup profit beats on investment banking boost

By Imani Moise and Siddharth Cavale

(Reuters) - Citigroup Inc reported higher-than-expected earnings on Monday despite declining revenue as the New York-based lender cut costs, grew its investment-banking business and expanded net-interest margin.

Still, Citi improved its results in ways, including expense cutting, that may be tough to replicate in future quarters. A lower tax rate also played a big role in Citi’s improvement from a year ago.

The bank’s income from continuing operations declined slightly. On a call with reporters, Chief Financial Officer Mark Mason said the decline was due in part to a divestiture last year. But net income rose because the bank’s effective tax rate declined to 21 percent from 24 percent a year earlier.

Citi has been investing in digital capability to try to win deposits domestically despite its light U.S. branch network. Chief Executive Mike Corbat said in a statement its efforts are showing positive early results.

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But the bank is still growing deposits faster abroad than in the United States: International consumer deposits rose 3 percent during the quarter, while retail North American deposits edged up 1 percent.

JPMorgan Chase & Co on Friday reported that its U.S. consumer deposits were up 3 percent from a year earlier.

Corbat also pointed to the bank’s improved 11.9-percent return on average tangible common shareholder’s equity and the $5.1 billion it returned in capital to shareholders during the quarter.

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“Both our consumer and institutional businesses performed well and we saw good momentum in those areas where we have been investing,” he said.

Investment banking revenue rose 20 percent to $1.4 billion, as strong growth in advisory and investment-grade debt underwriting more than offset a drop in equity underwriting.

Bond trading rose 1 percent in sharp contrast to Goldman Sachs and JPMorgan, both of which reported double-digit declines.

But a 24-percent drop in equities trading pressured Citi’s overall revenue, which fell 2 percent to $18.58 billion, slightly below analysts’ estimates.

Revenue from consumer banking, the bank’s largest business, was flat at $8.5 billion, due to weakness in Asia.

North American branded cards revenue jumped 5 percent during the quarter, including the impact of a one-time gain the year before.

In 2018, Citigroup ranked third in the United States for outstanding credit-card loans, with an 11.4 percent market share, behind first-place JPMorgan Chase and second-place American Express, according to The Nilson Report.

Earlier this year, the bank said it would earn $2 billion more in revenue from lending activities than it did in 2018.

Total loans at the third-largest U.S. bank by assets rose 3 percent to $682.3 billion, while deposits grew 5 percent to $1.03 trillion, excluding foreign exchange fluctuations.

Citi’s net-interest margin, a closely watched metric, expanded 8 basis points to 2.72 percent in the quarter. Total operating expenses fell 3 percent to $10.58 billion

Leading into the reporting season some analysts feared that net interest margin would peak since the Federal Reserve signaled it would not raise interest rates this year. On a call with analysts, Mason said that a rate cut or the absence of a rate hike would not have a material impact on results for the year.

Net income rose to $4.71 billion, or $1.87 per share, for the first quarter ended March 31 from $4.62 billion, or $1.68 per share, a year earlier.

Analysts were looking for a profit of $1.80 per share, according to IBES data from Refinitiv.

(Reporting by Imani Moise in New York and Sidharth Cavale in Bengaluru; Editing by Nick Zieminski and Phil Berlowitz)

This story has not been edited by Firstpost staff and is generated by auto-feed.