Citigroup Inc. rates and currencies traders posted their best third quarter in at least eight years as the Federal Reserve kept investors on their toes about the future of heightened interest rates.
(Bloomberg) — Citigroup Inc. rates and currencies traders posted their best third quarter in at least eight years as the Federal Reserve kept investors on their toes about the future of heightened interest rates.
The larger-than-expected $2.8 billion windfall boosted total fixed-income trading 14% and added to better-than-expected revenue, costs and even loan performance. Net income — which analysts estimated would fall 22% — rose slightly, the New York-based firm said Friday.
The results come at a pivotal moment for Chief Executive Officer Jane Fraser, who last month announced a companywide reorganization that puts a spotlight on five key segments: trading, banking, wealth management, services and dealings with US consumers. In a rare alignment, all five saw revenue rise in the three months through September.
Read more: Citi’s Fraser to Remove Five Management Layers in Reorganization
“We are proving to our clients that we truly are a bank for all seasons,” Fraser said in a statement. “When completed, we will have a simpler firm that can operate faster, better serve our clients and unlock value for our shareholders.”
Firm-wide revenue amounted to $20.1 billion, topping the $19.2 billion average of analysts’ estimates compiled by Bloomberg. The firm also returned $1.5 billion to shareholders through dividends and buybacks in the quarter.
Citigroup’s shares were up 2.79% at 10:07 a.m. in New York.
Tempered Expectations
On a number of fronts, Citigroup is beating shareholders’ tempered expectations.
The bank’s 10% increase in total trading revenue, for example, comes just weeks after Chief Financial Officer Mark Mason signaled it would rise by a percentage in the “low single digits.”
While expenses were lower than analysts anticipated, the number was still higher than a year earlier as Citigroup invested in operations to satisfy a three-year-old promise to regulators that it would shore up risk management. The firm also set aside funds for severance as it cut jobs.
Read more: Fed-Up Fraser Turns to Downsizing to Cure Citi’s Painful Slump
Fraser recently warned that the company is starting to see signs of stress among US consumers with lower credit scores as inflation erodes pandemic-era savings.
The bank set aside $1.8 billion in provisions in the quarter, a 35% increase from a year earlier. That included a credit-reserve build of $125 million as customers carried higher balances on cards.
“We’re managing our capital in a disciplined way in light of regulatory headwinds, while continuing to optimize and return capital to shareholders,” Mason told journalists on a conference call Friday, noting the firm expects to do a modest amount of buybacks and dividends in the fourth quarter.
The firm’s investment banking revenue also topped estimates, jumping 34% to $844 million. Debt underwriting fees rose, with Fraser also touting “some signs of life in the equity capital markets.”
Citigroup installed Flavio Figueiredo as the new head of its massive currencies-trading franchise in July. The bank has ranked No. 1 by market share in that business for 10 straight years, according to Coalition Greenwich.
The rates business is co-led by Pedro Goldbaum and Deirdre Dunn, who this year was named chair of the Treasury Borrowing Advisory Committee, an elite group of Wall Street traders who advise the Treasury Department on borrowing.
While the Fed’s push to quell inflation with higher interest rates helped traders, Citigroup also felt the pressure. Deposits dropped 3% in the third quarter as corporate customers and wealthy clients shifted into higher-yielding investments.
(Updates with shares in sixth, CFO comments in 12th paragraph.)
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