Citigroup posted a 42 percent rise in second-quarter earnings on Monday, handily beating expectations, as the sprawling bank worked to cut costs and expand its international lending operations.þþThe bank, which has hitched much of its hopes for growth to emerging markets, reported a profit of $4.18 billion, or $1.34 a share, compared with $2.94 billion, or $1 a share, in the period a year earlier. Citigroup, the nation’s third-largest bank by assets, reported revenue of $20.5 billion, up 12 percent from the period a year earlier.þþExcluding a $477 million gain from a valuation adjustment on Citigroup’s debt, the bank reported earnings of $1.25 a share. The results were bolstered by strong gains in trading revenue.þþThe performance exceeded analysts’ profit expectations of $3.55 billion, or $1.19 a share. Citibank was expected to report revenue of $19.76 billion, up from $18.64 billion in the period a year earlier.þþWith international lending operations that dwarf those of many of its United States rivals, Citigroup’s opportunities for growth rise and fall with the fate of emerging markets. Any sluggishness overseas, particularly in Mexico where the bank has a large presence, always lurks as an issue that could undercut earnings.þþDuring a conference call on Friday, Jamie Dimon, the brash chairman and chief executive of JPMorgan Chase, commented on the strength of emerging markets when the bank reported its earnings. “Our folks in emerging markets did a particularly good job, which might not be the same for some others reporting,” he said.þþCitigroup has been wrestling with largely stagnant growth in its consumer banking unit and turbulence in Asia and Latin America. Underpinning the results on Monday was a continued push by the bank to expand its operations abroad. That growth beyond the United States is coupled with a concerted effort to unwind business units that are no longer core to Citigroup’s operations.þþStill, Citigroup’s quarterly earnings point to broader challenges facing the United States banking industry. On Friday, JPMorgan Chase and Wells Fargo reported declines in mortgage banking revenue, eroded in part by refinancing machines that were beginning to slow. A sharp uptick in interest rates has caused the refinancing boom to sputter.þþContinually rising rates could put a damper on borrowers’ appetite for refinancing existing mortgages or buying a house.þþ“Our businesses performed well during the quarter and these results are well balanced through our products and geographies, especially in the emerging markets, where growth is being challenged,” Michael L. Corbat, the chief executive of Citigroup, said in the bank’s earnings release on Monday.þþUnder Mr. Corbat’s leadership, Citigroup is continuing to refocus on businesses that fit within its core strategy. As part of that push, the bank has shed $18 billion worth of assets. Citigroup also sold the remainder of its stake in the Morgan Stanley Smith Barney brokerage joint venture. Mr. Corbat also reached deals during the second quarter to sell the bank’s consumer lending units in Turkey and Uruguay.þþLike its large bank peers, Citigroup is wrestling with how to offset the lackluster American economy and income siphoned off by new financial regulation. For Citigroup, that means funneling more energy into its international operations. Revenue from consumer banking abroad rose 6 percent, to $4.7 billion, compared with the period a year earlier. Adding to the uncertainty for Citigroup is the mercurial regulatory challenges abroad. Profits from those units grew by 4 percent, to $826 million.þþSecond-quarter revenue from stock trading rose 68 percent, to $942 million. Another bright spot was Citigroup’s securities and investment banking business. Within fixed income, revenue swelled 18 percent, to $3.37 billion.þþInvestors are closely watching the bank’s quarterly reports during the first year under the leadership of Mr. Corbat, who took the reins after the ouster of Vikram S. Pandit. In October, Michael E. O’Neill, the bank’s forceful chairman, pushed Mr. Pandit out in favor of Mr. Corbat.þþBuilding on the path outlined by Mr. Pandit, Mr. Corbat has promised to continue cutting costs. Toward that goal, Citigroup reduced assets in its Citi Holdings unit by 31 percent in second quarter, to $131 billion. In an encouraging sign for Citigroup, losses within the unit that houses a glut of unwanted assets fell to $570 million from $910 million in the period a year earlier.þþEven as Mr. Corbat has aggressively moved to reduce the bank’s costs, operating expenses rose 1 percent, to $12.1 billion, from the period a year earlier. Last year, as one of his first initiatives after taking over as chief executive, Mr. Corbat announced plans to eliminate 11,000 jobs.þþAs the bank seeks to move beyond the specter of its mortgage woes, Citigroup agreed in June to pay $968 million to settle claims that it had sold shaky mortgage loans to Fannie Mae. Before the bank empties its reserves to cushion against mortgage losses, Citibank has said it will be conservative, waiting for substantial improvement in the housing market and overall economy.
Source: NY Times
