Citigroup reported second quarter
earnings before the market opened on July 14th, 2014. The bank also reported settling with the
government for a $7 billion fine. The
bank took a pretax hit of $3.8 billion this quarter, which led to revenue of
$19.34 billion but a profit of $181 million ( 3 cents a share).
Excluding the one-time legal fees, EPS was $1.24, topping estimates of
$1.05.
Citi reported a 15% drop in overall
trading revenue, much less than the 25% anticipated by CFO John Gerspach. This
was aggregated from a 12% drop in Fixed Income trading, and a 26% drop in
equities. But investment banking revenue jumped 16%, driven by an increase in
debt and equity underwriting. As like Wells Fargo earlier in the week, Citi was
hurt by low mortgage originations. They
continued to benefit from stronger credit quality, with cost of credit dropping
15% year over year.
On the
earnings call, the CFO noted it’s continued effort to re-size retail
operations, with the closing of 70 branches.
Retail services revenue was up 7%.
He said Citi is expecting to see substantial revenue growth in the
second half of 2014.
The company also managed to cut costs by 3% year over year,
as CEO Michael Corbat continues to be successful in his streamlining and
cost-cutting initiatives. Another
positive note, Citi realized its first profit in Citiholdings, where it’s bad
assets are stored. The amount of the
$244 million gain compares to a $591 loss a year earlier.
As the
second bank to make a deal with the government, Citigroup avoided a long and
costly court battle. They also closed
the book on any litigation from subprime mortgage backed securities, and credit
default obligations. The bank will pay
$4.5 billion in cash, and another $2.5 billion in consumer relief. The $7 billion is higher than Citi offered,
but much lower than the $12 billion seeked by the Justice Department.
The stock rallied $1.42 or 3.02% on the day.
No comments:
Post a Comment