Citigroup Opens Earnings Season with Private Banking Boost
Citigroup, the first large bank to report second-quarter earnings, said Monday that revenue at its private bank rose from a year earlier but failed to offset disappointing results in trading and investment banking.The private bank, the largest part of CIti’s wealth business following sale of Smith Barney to Morgan Stanley after the financial crisis, booked a 2% jump in revenue to $848 million from the year-earlier quarter (but was down 2% from $866 million in the robust first quarter of 2019). That could bode well for results from Bank of America’s Merrill Lynch on Tuesday and from Morgan Stanley on Thursday.
Revenue from trading at the New York banking giant dropped about 5%, worse than analysts had projected. It was the third straight quarterly decline in the unit that helps institutional customers trade interest-rate and other fixed-income instruments, and came despite a one-time $355-million gain from sale of Citi’s stake in Tradeweb Markets Inc. initial public offering.
The private bank, which sells wealth management services to ultra-high-net-worth clients and their businesses, family offices and law firms, thrived over the year-earlier quarter. Citi attributed the private bank gains to higher loans and deposits from new and existing customers and growth in assets under management, partially offset by interest-rate spread compression.
Loans to “corporations” in the private bank grew 11% to $102.6 billion from the year-earlier quarter.
In a conference calls with investors and reporters, Citigroup executives said institutional investors pulled back from trading in the second quarter, despite record stock-market highs. Trading became precarious amid President Trump’s threats to ratchet up tariffs and the Federal Reserve’s shifting stance on interest rates. “Many investors remained on the sidelines,” Chief Financial Officer Mark Mason said on a conference call with investors.
Citi Chief Executive Michael Corbat said activity is likely to accelerate as customers respond to the likelihood that the Federal Reserve will lower rates, reversing their and the bank’s earlier expectations that rates would rise this year.
The private client group is part of Citigroup’s wide-reaching institutional clients group that also includes trading, corporate treasury services and investment banking. Revenue in the group was about flat at $9.7 billion but net income grew 3% largely because of cost-cutting and lower taxes, the bank company said.
Corbat said he was pleased with the performance of Citi’s consumer banking franchise during the second quarter, particularly in the United States. The business added $3 billion in deposits and credit-card billing jumped 6% during the quarter. Consumer banking revenue climbed 3% to $8.51 billion, beating analysts’ projections and reversing flat results in this year’s first quarter.
Overall, net income at Citigroup rose rose 7% to $4.8 billion in last year’s second quarter. Earnings per share of $1.83, excluding the gain on Tradeweb, beat analysts’ forecast of $1.80.