(Reuters) – Citigroup Inc on Friday posted a weaker-than-expected 27% drop in quarterly profit as the third-largest U.S. bank’s trading desk benefited from heightened market volatility, mitigating a slump in the investment bank.
Markets revenue jumped a quarter to $5.3 billion, helped by volatility in commodity and foreign exchange markets – a particularly strong segment for the bank.
Trading has become a bright spot for Wall Street banks this quarter as clients seek to rebalance their portfolios amid geopolitical tensions, soaring inflation and fears that aggressive Reserve policy tightening federal government does not plunge the economy into a recession.
Citi shares rose more than 4% in premarket trading.
The bank’s profit fell to $4.5 billion, or $2.19 per share, in the quarter ended June 30, from $6.2 billion, or $2.85 per share, a year earlier. earlier.
Excluding items, Citi earned $2.30 per share, according to Refinitiv calculations, beating analysts’ average estimate of $1.68 per share.
The drop in profits also reflects a $375 million increase in reserves for potentially sour-loss loans as the economic outlook darkens. A year earlier, exceptional government stimulus and the recovery of the economy from the pandemic had allowed it to free up $2.4 billion in reserves.
That pushed up credit costs to $1.3 billion, a stark contrast to the $1.07 billion benefit a year earlier.
Investment banking revenue fell 46% to $805 million as market volatility dried up investment bankers’ underwriting and advisory fees that drove Wall Street profits at the height of COVID -19.
The Treasury and Business Solutions business – the jewel in Citi’s crown – posted a 33% increase in revenue to $3 billion on higher net interest income and fee growth.
The bank, which disclosed an $8.4 billion exposure to Russia in the second quarter, said it was considering options to exit its retail and business banking business in the country.
As the most global U.S. bank, Citigroup has been hit by Western sanctions against Russia following its invasion of Ukraine, which saw dozens of companies leave the country.
(Reporting by Mehnaz Yasmin and Niket Nishant in Bengaluru and David Henry in New York; Editing by Aditya Soni)
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