Citi beats on Q2 earnings

Citi reported second-quarter earnings Friday that beat on the bottom line.

The firm reported adjusted earnings per share of $1.24 on revenue of $17.55 billion.

Analysts were expecting adjusted earnings per share of $1.10 on revenue of $17.56 billion, according to Bloomberg.

“These results demonstrate our ability to generate solid earnings in a challenging and volatile environment,” CEO Michael Corbat said in a statement. “Nearly all of our net income came from our core businesses, and we continued to reduce noncore assets in Citi Holdings.”

In the same quarter last year, Citi reported earnings per share of $1.45 on revenue of $19.5 billion.

Citi’s profit fell to $4 billion from $4.65 billion a year ago, while the net interest margin slipped to 2.86% from 2.95% a year ago.

Citi beat analyst expectations for both trading and banking revenues.

  • Total trading revenues came in at $4.66 billion ($3.85 billion expected), up 10% year-over-year.
  • Fixed-income revenues of $3.47 billion ($3.14 billion expected) were up 14%, driven by an increase in rates and currencies trading but offset by lower revenues in securitized products.
  • Equity trading revenues came in at $788 million ($707.5 million expected), up 21% from last year, including a previously-disclosed charge of $175 million for valuation adjustments related to some financing transactions. Without that adjustment, equity trading revenues were down 4%.
  • Investment banking revenues came in at $1.22 billion ($972.5 million expected), down 6% year-over-year.

In the first quarter, Citi beat expectations despite a major profit drop. The firm reported adjusted earnings per share of $1.10 ($1.05 expected) on revenue of $17.55 billion ($17.53 billion expected).

The big story during the second quarter was the UK’s decision in June to leave the European Union, which sent shockwaves through markets and could deter central banks from raising interest rates anytime soon.

In the short term, that could be good news for banks’ trading revenues, but the long-term impacts are less rosy. Bank profitability is based largely on the rate at which the banks make loans. Lower global interest rates, in turn, negatively affect bank bottom lines.

JPMorgan reported Q2 earnings on Thursday, beating expectations. Wells Fargo also reported Friday morning. Bank of America Merrill Lynch will report Monday, Goldman Sachs will on Tuesday, and Morgan Stanley will Wednesday.

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