Citigroup Inc. reported a better-than-expected quarterly profit on Friday, helped by lower expenses, higher bond trading revenue and strength in its consumer banking business in Mexico.
Operating expenses declined 1 per cent, surprising analysts and indicating that the company was on the way to meeting financial targets for this year.
The company also showed an improvement in the yield from its North America Citi-branded card business, which analysts were watching closely, adding another argument for its profit outlook.
Citigroup’s shares rose 1.6 per cent to US$69.48 by mid-afternoon.
Investors have been waiting to see how trading revenue fared at the five big Wall Street banks, due to an escalating U.S-China trade war and executives warning that the business’s growth would be muted.
Citigroup reported a 9-per-cent jump in bond trading revenue, outperforming bigger rival JPMorgan Chase & Co, which reported a 10-per-cent drop in fixed-income trading revenue.
Chief Financial Officer John Gerspach had previously said Citigroup expected total fixed income and equity trading revenue to be “flat to slightly higher” in the third quarter.
In a conference call with reporters, Gerspach said the expense savings showed that the company is improving its efficiency as executives had projected.
Citigroup is in the midst of a drive to save US$2.8-billion in costs by 2020 as it spends US$1.5-billion on technology and other productivity improvements.
Citigroup reported a 2-per-cent rise in global consumer banking revenue. The bank recently restructured its U.S. consumer business to operate more like those in Asia and Mexico, where it has been seeing better results.
Consumer banking revenue in Latin America rose 8 per cent, excluding a one-time gain and on a constant-currency basis.
Yields from the North America branded-card business turned up as more promotional credit card loans, which charge no interest for as long as 21 months, converted to interest-earning.
Gerspach said the promotional strategy was paying off as interest-earning balances grew 7 per cent and net interest revenue as a percent of loans in a core portfolio rose to was 8.51 per cent from 8.28 per cent in the second quarter.
“That is a good indicator of the future for this business,” Gerspach said.
Net income for the third-largest U.S. bank by assets rose to US$4.62-billion in the third quarter ended Sept. 30, from $4.13 billion a year earlier.
Earnings per share rose to US$1.73 from US$1.42, helped by buybacks that reduced shares outstanding by 8 per cent from a year earlier.
Analysts on average had expected earnings per share of US$1.69, according to I/B/E/S data from Refinitiv. Total revenue was slightly lower at US$18.39 billion, from US$18.42 billion a year earlier.
Citigroup’s provision for income taxes fell by US$395-million following changes in the U.S. tax code, which reduced the bank’s tax rate to 24 per cent in the quarter from 31 per cent a year earlier.
The bank’s return on tangible common equity was 11.3 per cent in the quarter, inching closer to Chief Executive Officer Mike Corbat’s goal of 13.5 per cent in 2020.
Up to Thursday’s close, Citi shares have lost 8 per cent of their value for the year, compared with a 5-per-cent drop in the broader KBW Bank Index.