Citi’s stock traders extend hot streak as bank sees sale hit

Citigroup’s equities traders surpassed analyst estimates for a fifth straight quarter, adding to signs that investments in expanding the business are starting to take hold.

The 40% jump in revenue from stock trading — a business long overshadowed by rivals’ larger franchises and Citigroup’s own fixed-income division — pushed the unit’s haul above $1 billion for a third-straight period, it said in a statement.

“The recovery from the pandemic continues to drive corporate and consumer confidence and is creating very active client engagement as you can see through our strong results in investment banking and equity markets,” Chief Executive Jane Fraser said.

That run helped Citigroup generate more revenue than analysts estimated in the three months through September, even as the bank’s credit card unit — the world’s largest — struggled to boost lending and the company booked a $680 million charge tied to the sale of its consumer business in Australia.

Shares of Citigroup rose 1.4% to $71.25 in early trading in New York.

Citigroup’s results show just how much Wall Street banks benefited from wild markets in September, which saw volatility soar and major equity indexes touch records. Just four weeks ago, Chief Financial Officer Mark Mason warned that total trading revenue would suffer percentage declines in the low to mid teens.
Citigroup ended the quarter with total trading revenue down only about 5%.

Under new equities chief Fater Belbachir, Citigroup reorganized the stock trading unit in December as part of a bid to become a top-four player within two to three years. Its $1.23 billion in revenue dwarfed the $909 million estimate from analysts surveyed by Bloomberg. It’s still smaller than franchises at other big U.S. investment banks.

Revenue from trading fixed-income, currencies and commodities didn’t fall as dramatically as analysts predicted, declining 16% to $3.18 billion amid a slump across the industry.

Revenue from Citigroup’s investment banking businesses soared 39%, topping analysts’ estimates, as the firm’s dealmakers handled a deluge of corporate transactions. Overall advisory fees more than tripled to $539 million in the period.

Those Wall Street business lines and a $1.16 billion release of reserves previously set aside for potential loan losses helped the New York-based bank post net income of $4.6 billion, beating the $3.9 billion average estimate of analysts.

Citigroup, in the midst of selling off retail operations in 12 countries across Asia and Europe, had previously warned it would record a pretax loss on the sale of those operations in Australia. Including that loss, revenue dropped 1% to $17.15 billion — better than the 2.2% decline estimated by analysts.

While spending on Citigroup’s branded cards rose 24%, card loan balances slipped 3% as consumers continued to pay down their debt. Investors have been on edge this week over mounting competition within the card industry.

Issuers including American Express, Discover Financial Services and Capital One Financial were among the worst performers in the S&P 500 on Tuesday after JPMorgan Chase said it was spending more to sign up customers.

Expenses in Citigroup’s global consumer banking unit, which includes the costs for the cards business, jumped 7%, which the firm partially attributed to “business-led investments and volume-related expenses.”

Under Fraser, Citigroup has been spending more to overhaul many of its underlying internal controls and risk management systems as part of efforts to satisfy a pair of consent orders from regulators late last year. Overall costs jumped 5% to $11.48 billion, slightly higher than the $11.42 billion average of analyst estimates compiled by Bloomberg.

“We are moving forward with urgency on our top priorities in order to responsibly narrow the returns gap with our peers: the transformation, refreshing our strategy and building a culture of excellence,” Fraser said in the statement.

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