Citigroup beats analysts’ estimates for profit, helped by $1.1 billion boost from loans

Citigroup on Wednesday posted second-quarter results that benefited from a $1.1 billion boost from releasing reserves the bank had set aside for loan losses.

Here’s how the bank did:

Earnings: $2.85 a share, topping the $1.96 estimate of analysts surveyed by Refinitiv.

Revenue: $17.47 billion, edging out the $17.2 billion estimate.

While the bank managed to top expectations for revenue, the figure declined 12% from a year earlier, driven by lower results in fixed income trading, falling credit card loans and dropping interest rates.

The firm’s earnings jumped after it released reserves set aside for loan losses, resulting in a $1.1 billion benefit after $1.3 billion in charge-offs. A year ago, the bank had been forced to set aside billions for expected credit losses, resulting in an $8.2 billion credit cost.  

Shares of the bank climbed 1.6% after the earnings report.

“The pace of the global recovery is exceeding earlier expectations and with it, consumer and corporate confidence is rising,” CEO Jane Fraser said in the release. “We saw this across our businesses, as reflected in our performance in Investment Banking and Equities as well as markedly increased spending on our credit cards. While we have to be mindful of the unevenness in the recovery globally, we are optimistic about the momentum ahead.”

Like other Wall Street rivals, Citigroup posted a sharp decline in fixed income trading revenue in the quarter, partially offset by higher equities trading results.

Fixed income operations generated $3.2 billion in revenue, below the $3.66 billion estimate, while equities trading revenue of $1.1 billion topped the $879 million estimate.

Fraser, who became CEO in February, announced in April that Citigroup was exiting retail operations in 13 countries outside the U.S. to improve returns. Now, analysts wonder what else Fraser has planned for her strategic revamp of Citigroup, the third biggest U.S. bank by assets.

Shares of Citigroup have climbed 11% this year before Wednesday, compared with the 26% advance of the KBW Bank Index.

Earlier Wednesday, Bank of America posted revenue that missed analysts’ expectations, driven by a drop in interest rates. On Tuesday, JPMorgan Chase and Goldman Sachs each posted results that beat expectations, helped by strong revenue from Wall Street advisory activities.