Citigroup profit beats on consumer banking, but revenue disappoints

(Reuters) – Citigroup Inc’s (C.N) quarterly profit topped Wall Street estimates on strength in its consumer banking business, but revenue missed expectations, weighed down by lower debt underwriting.

The third-largest U.S. bank by assets, like its peers, has benefited from a cut in income tax rates and an expanding U.S. economy that has fueled demand for loans.

The bank’s total loans rose 5 percent in the second quarter. Bigger rival JPMorgan Chase & Co (JPM.N) reported a 7 percent rise in average core loans earlier on Friday.

Citigroup’s shares were down 1.5 percent in premarket trading.

Overall, revenue rose about 2 percent to $18.47 billion but came in slightly below the average expectation of $18.51 billion.

Debt underwriting revenue fell 20 percent in the wake of rising interest rates.

The bank’s fixed income trading revenue fell 6 percent, while equity trading revenue rose 19 percent. Total markets and securities services revenue fell 1 percent.

FILE PHOTO: The Citigroup Inc (Citi) logo is seen at the SIBOS banking and financial conference in Toronto, Ontario, Canada October 19, 2017. REUTERS/Chris Helgren

Last month, Chief Financial Officer John Gerspach said he expected trading revenue to be “flattish” compared with a year earlier.

Net income rose 16 percent to $4.49 billion in the second quarter ended June 30, driven by a 14 percent jump in net income for its global consumer banking.

Earnings per share rose to $1.63 from $1.28 and topped analysts’ average estimate of $1.56, according to Thomson Reuters I/B/E/S.

Chief Executive Michael Corbat said in a statement on Friday that given the results he remained confident of achieving the financial targets set last year.

Corbat had last year outlined an ambitious plan to grow profit and return at least $60 billion to shareholders.

At its first investor day in nine years in July last year, Citigroup executives detailed ways they intend to generate more revenue, cut unnecessary costs, use capital more wisely and get back to building businesses after a long period of divestitures.

The bank’s provision for income tax fell by $351 million in the reported quarter, following President Donald Trump’s corporate tax rate cuts.

Through Thursday, Citigroup shares are down 7.9 percent for the year, compared with the 1 percent drop in the broader KBW Bank Index .BKX.

JPMorgan Chase & Co’s (JPM.N) quarterly profit topped Wall Street’s expectations on Friday, as trading revenue came in much higher than expected and demand for loans increased on the back of a strengthening U.S. economy.

Reporting by Sweta Singh in Bengaluru and David Henry in New York; Editing by Sriraj Kalluvila

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