Citigroup profit jumps 51% as costs fall

Net income rose to US$4.29 billion, or US$1.35 per share, in the third quarter from US$2.84 billion, or 88 cents per share, a year earlier, when the bank had taken a near US$2 billion charge for litigation and restructuring costs. Excluding CVA/DVA, earnings were $1.31 per share, up 38% from prior year earnings of $0.95 per share.

Operating expenses fell 18 percent as the bank exited businesses where profits and prospects were not worthwhile. The firm passed the Federal Reserve’s “stress tests” earlier this year and legal expenses this quarter were $376 billion, down from $1.6 billion a year earlier. The business had revenue of $18.50 billion for the quarter, compared to the consensus estimate of $19.27 billion.

Cost cuts helped Bank of America Corp boost net income to $4.51 billion from a year-earlier loss. “And despite revenue headwinds, we once again proved our ability to manage our risk, our expenses and our capital”.

“I feel good about the quality and consistency of our earnings over the course of this year, as we have continued to make solid progress against our core priorities”, said Michael Corbat, CEO of Citigroup, in a statement.

Citi will favour stock buybacks over dividends as long as its shares trade below their tangible book value, Corbat said.

Citi Holdings, “the bad bank” that holds Citi’s assets marked for sale, saw the biggest plunge in revenue, a steep 32 percent, as assets in the unit shrank 20 percent.

Citicorp, which houses Citigroup’s global consumer and corporate banking divisions, reported a profit of $US4.26 billion.

Citigroup’s effective tax rate was 30% in the current quarter, a decrease from 41% in the prior year period (excluding CVA/DVA in each period).

Financial giant Citigroup’s second quarter profits were boosted by a sharp drop in legal and related expenses and repositioning costs. Q3 card revenue fell 9% Y/Y to $1.93B.

Like other large banks, Citigroup suffered from lower revenues in bond trading, partially offset by higher revenues from equity trading.

The bank’s shares have fallen 6.3 per cent since the start of 2015, roughly in line with the fall in the KBW Nasdaq index of bank stocks over the same period. Guggenheim upgraded shares of Citigroup from a “neutral” rating to a “buy” rating and raised their price target for the stock from $53.44 to $53.48 in a research report on Friday, August 28th.