GuruFocus -
- Net Income: $3.2 billion.
- Earnings Per Share (EPS): $1.51.
- Return on Tangible Common Equity (RoTCE): 7%.
- Total Revenue: $20.3 billion, up 1% on a reported basis, 3% excluding divestitures.
- Expenses: $13.3 billion, down 2% year-over-year.
- Net Interest Income (NII) Excluding Markets: Down 1% year-over-year.
- Cost of Credit: $2.7 billion.
- Common Equity Tier 1 (CET1) Capital Ratio: 13.7%.
- Services Revenue Growth: Up 8%.
- Equities Revenue Growth: Up 32%.
- Fixed Income Revenue: Down 6%.
- Investment Banking Fees: Up 44%.
- Wealth Revenue Growth: Up 9%.
- US Personal Banking Revenue Growth: Up 3%.
- Branded Cards Revenue Growth: Up 8%.
- Capital Returned: $2.1 billion, including $1 billion in share repurchases.
For the complete transcript of the earnings call, please refer to the full earnings call transcript.
Positive Points
- Citigroup Inc (NYSE:C) reported net income of $3.2 billion and earnings per share of $1.51, with a return on tangible common equity (RoTCE) of 7%.
- Overall revenues grew by 3% excluding divestitures, with each core business delivering growth and positive operating leverage.
- The services division delivered a record quarter with revenues up by 8%, driven by significant fee growth and loan and deposit volume growth.
- Investment banking fees increased by 44%, driven by investment-grade debt issuance and strategic transactions.
- The wealth management division saw revenues increase by 9%, with client investment assets growing by 24%.
- Fixed income revenues decreased by 6%, with the rates and currencies business not matching last year's performance.
- Net interest income, excluding markets, was down 1% year over year, largely due to lower interest rates in Argentina.
- Retail services revenues decreased by 1% due to a slowing growth rate in interest-earning balances.
- The cost of credit was $2.7 billion, driven by net credit losses in card portfolios and allowance for credit losses (ACL) builds.
- Expenses were $13.3 billion, down only 2%, with continued investments in transformation and risk and control initiatives.
A: Mark Mason, CFO: Retail services are seeing spend volumes and payment rates decline, which affects interest-earning balances and loss rates. We expect loss rates to be on the higher end of the range, potentially higher in Q4, depending on holiday spending. Our reserves are healthy, with a reserve-to-loan ratio of about 11.7%, and we are seeing stabilization in delinquencies across portfolios.
Q: Why did you choose Apollo for your partnership, and are there other parts of the franchise that could benefit from private market ties?
A: Jane Fraser, CEO: Partnering with Apollo allows us to combine our banking reach with innovative financing solutions for clients. Other partners like Mubadala are also involved. This partnership enhances access to private lending capital, particularly in the U.S. We may explore more partnerships in the future.
Q: Can you clarify the NII ex-markets outlook and any one-off impacts on securities yield?
A: Mark Mason, CFO: The low NII in Q2 was due to FX translation and lower card balances. Q3 benefited from lending volumes and deposit spreads. We expect NII ex-markets to be flat in Q4. Our interest rate sensitivity is more non-U.S., and we manage beta actively with clients.
Q: How does Citi plan to meet its 2026 expense guidance while achieving regulatory targets?
A: Mark Mason, CFO: We aim to reduce expenses from $53.8 billion to $51-$53 billion by 2026 through headcount reductions, eliminating stranded costs, and realizing efficiencies from investments. We are committed to meeting regulatory targets and improving operations.
Q: What is the progress on Banamex's IPO, and how does it contribute to capital optimization?
A: Jane Fraser, CEO: We plan to complete the separation of Banamex in Q4 2024 and aim for an IPO by the end of 2025, depending on market conditions. Banamex contributes positively to returns, and we are focused on maximizing shareholder value.
For the complete transcript of the earnings call, please refer to the full earnings call transcript.