Citi posts highest profit in 8 years as costs plunge

Friday, 17 July 2015 00:00 - - {{hitsCtrl.values.hits}}

Reuters: Citigroup Inc, the third biggest US bank by assets, reported its highest quarterly profit in eight years as restructuring and cost cuts paid off and legal expenses plunged.

Citi, in a bid to simplify its structure, has been selling retail operations in several countries, shrinking its US branch network and disposing of non-core businesses.

The bank’s shares rose 2.6% to $57.95 in premarket trading on Thursday after its adjusted earnings handily beat analysts’ estimates.

Operating expenses in Citicorp, which holds the bank’s core businesses, fell 6% to $9.8 billion in the second quarter and declined 1% when adjusted for currency changes.

The expenses included $61 million in restructuring charges, down from $397 million a year earlier.

Citi shrank the assets of Citi Holdings, which houses the businesses it plans to sell, by 22%. The unit posted earnings of $157 million for the quarter.

“Through active expense and balance sheet discipline, we are on track to reach our financial targets for the year,” Chief Executive Michael Corbat said in a statement.

Citi’s return on average assets was 1.06% in the quarter ended June 30, higher than Corbat’s target of at least 0.9% for the year.

Revenue from the bank’s fixed income business fell 1% to $3.06 billion, a much smaller decline than that reported by its Wall Street rivals.

Goldman Sachs Group Inc, which reported a steep fall in profit earlier on Thursday, said net revenue from fixed-income, currency and commodity trading plunged 28%.

Bank of America Corp’s fixed income revenue fell 9.3%, while JPMorgan Chase & Co posted a 10% drop.

Citi’s net income rose to $4.85 billion, or $1.51 per share, in the second quarter from $181 million, or 3 cents per share, a year earlier, when the bank was hit by a $3.8 billion legal charge.

Adjusting for legal costs and some accounting items, earnings rose 18% to $4.65 billion, or $1.45 per share, beating the average analyst estimate of $1.34 per share, according to Thomson Reuters I/B/E/S.

Total adjusted revenue fell 1.5% to $19.16 billion, coming slightly above analysts’ expectations of $19.11 billion.

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