Wednesday, November 13, 2024
English English French Spanish Italian Korean Japanese Russian Hindi Chinese (Simplified)

Citigroup Inc. reported better-than-expected earnings for the second quarter of 2024 on Friday, driven by a notable increase in revenue from investment banking, market activities, and services. However, despite these strong financial results, the bank’s shares declined by 2% as investors expressed concerns about rising expenses, dividend payments, and the bank’s market share.

For the quarter ending June 30, Citigroup posted earnings of $1.52 per share, surpassing analysts’ forecasts of $1.39 per share, as reported by LSEG data. This performance marked a significant achievement for the bank, especially considering the challenging economic environment.

Despite this positive financial outcome, Citigroup faced a setback with a 7.2% shareholder return, which fell short of its target range of 11% to 12%. Warren Kornfeld, Senior Vice President at Moody’s Ratings, noted that while the results highlight the strength of Citigroup’s services sector, the bank faces challenges in expanding its market share and managing expenses across its other business segments.

The strong financial results come on the heels of a recent regulatory issue for Citigroup. Two days prior, U.S. regulators imposed a $136 million fine on the bank for failing to make sufficient progress in addressing data management issues that were identified back in 2020. Regulators also required Citigroup to demonstrate that it was allocating adequate resources to rectify these issues.

During a conference call with analysts, Citigroup’s CEO Jane Fraser and CFO Mark Mason fielded numerous questions regarding the bank’s plans for share buybacks and dividend payments, particularly in light of the regulatory challenges. The bank revealed plans to repurchase up to $1 billion worth of its stock in the upcoming quarter. Fraser clarified that there were no caps imposed by regulators on dividend payments to shareholders.

The bank’s strategy for addressing regulatory requirements is still under discussion with regulators. Fraser and Mason highlighted that Citi is assessing whether additional technology investments, platform adjustments, or increased staffing are necessary to address regulatory concerns effectively. They emphasized that while progress has been made in unifying data systems for regulatory reporting, further improvements are needed to ensure the accuracy of reports that utilize extensive data points without relying heavily on manual checks.

In addition to addressing regulatory issues, Citigroup is undergoing a major overhaul under Jane Fraser’s leadership, aimed at improving performance, reducing costs, and streamlining its operations. As part of this restructuring, the bank plans to reduce its workforce by 20,000 over the next two years.

For the second quarter, Citigroup’s revenue reached $20.1 billion, marking a 4% increase from the previous year. This increase was partly attributed to a $400 million gain from the partial sale of Visa stock in May. The bank has also started reporting earnings for its five business segments individually—services, markets, banking, U.S. personal banking, and wealth management—after previously consolidating them under broader divisions.

Investment banking fees surged by 60% in the second quarter to $853 million, reflecting a recovery in the industry after a prolonged slump. This boost contributed to a 38% increase in revenue for the banking division, which also includes corporate lending. CFO Mark Mason noted that the strong performance in debt issuance, mergers and acquisitions (M&A), and a nascent revival in the IPO market were key factors driving this growth.

Citigroup also experienced a 6% increase in markets revenue, reaching $5.1 billion, driven by a 37% rise in equities trading revenue. Additionally, services revenue grew by 3% to $4.7 billion, supported by the bank’s treasury and trade solutions business, which remains a cornerstone of its operations.

Operating expenses for the quarter decreased by 2% to $13.4 billion, benefiting from cost savings associated with the bank’s reorganization efforts. Citigroup anticipates that its full-year expenses will be at the higher end of its previously forecast range of $53.5 billion to $53.8 billion, excluding regulatory fines.

The broader banking sector saw varied results: JPMorgan Chase reported an increase in second-quarter profits, while Wells Fargo’s net income declined and fell short of interest income expectations. Citigroup’s wealth management division, a crucial element of Fraser’s growth strategy, saw only modest revenue growth of 2% to $1.8 billion. The bank’s U.S. personal banking revenue increased by 6% to $4.9 billion, driven primarily by growth in branded credit cards.

Analysts view 2024 as a transitional year for Citigroup as it continues to refine its operations under Fraser’s leadership. Despite recent challenges, investors have responded positively to Fraser’s efforts, with Citigroup’s stock rising by 28% this year, outperforming its closest rivals, JPMorgan Chase and Bank of America, as well as broader equity markets.

Subscribe

* indicates required

The Enterprise is an online business news portal that offers extensive reportage of corporate, economic, financial, market, and technology news from around the world. Visit to explore daily national, international & business news, track market movements, and read succinct coverage of significant events. The Enterprise is also your reach vehicle to connect with, and read about senior business executives.

Address: 150th Ct NE, Redmond, WA 98052-4166

©2024 The Enterprise – All Right Reserved.

This website uses cookies to improve your experience. We'll assume you're ok with this, but you can opt-out if you wish. Accept