Citigroup's Results Climb, Buoyed by Consumer Bank -- 2nd Update

Citigroup Inc. said Thursday that its third-quarter profit increased by more than 7% from a year earlier, boosted by gains in investment banking and progress in the firm's evolving consumer bank.

The bank's reported net income of $4.13 billion, up 7.6% from a year ago, while earnings per share rose to $1.42. The per-share figure was up handily from $1.24 a year ago and topped analyst expectations for $1.32 a share.

Citigroup also said quarterly revenue increased 2.3% from a year ago to $18.17 billion. That surpassed analysts' forecasts for $17.89 billion.

The stock rose in premarket trading, gaining 0.8% to $75.55.

Citigroup has been the best-performing stock among the biggest U.S. banks so far in 2017, thanks in large part to its commitment earlier this year to a plan to return some $60 billion to shareholders by 2020. But the bank continues to lag behind rivals on some measures, such as return on equity, and its share price remains well below where it once traded before the financial crisis.

Citigroup's return on equity was 7.3% in the third quarter. While up from 6.8% in the prior quarter and a year ago, that return is still far below the 10% level that marks a bank's theoretical cost of capital. Citigroup hasn't topped that hurdle in years.

Like its peers on Wall Street, Citigroup was expecting another tough quarter for trading revenue amid tepid volatility in financial markets. The banks trading revenue fell 11% from a year ago, to $3.63 billion, compared with the bank's forecast of a roughly 15% drop.

Citigroup's decline also was slimmer than that at rival J.P. Morgan Chase & Co., which reported Thursday that its trading revenue dropped 21% in the quarter.

Performance for Citigroup was particularly strong in equities, where revenue increased 16% from a year ago. That business is one of the smallest among big Wall Street banks, though. Fixed-income trading decreased 16%, again far better than J.P. Morgan's 27% decline.

Offsetting the trading performance was another sharp rise in investment banking at Citigroup. Revenue in that business rose 14% from a year ago to $1.23 billion.

Citigroup's consumer banking business showed a mixed performance. Global consumer banking revenue grew 3% globally from a year ago to $8.43 billion, led by a 10% gain in Mexico.

North American banking revenue also increased, though by just 1% from a year ago. Excluding the bank's legacy mortgage business, retail banking revenue rose 12% from a year ago.

However, the bank's consumer-banking profit fell 6% from a year ago. That was driven in part by an 11% increase in reserves for credit losses and a 26% increase in charge-offs. Consumer payback rates have been a concern for Citigroup and other banks, even as the U.S. labor market remains robust.

The bank's branded credit cards, which it markets directly to consumers, experienced a 1% revenue decline this quarter. Citigroup is the world's biggest card lender by balances outstanding.

Citigroup made progress on promises of greater cost control. Its efficiency ratio, or expenses as a percentage of revenue, improved to 56% for the quarter, better than the bank's target of 58% for the year.

Write to Telis Demos at

(END) Dow Jones Newswires

October 12, 2017 09:36 ET (13:36 GMT)