How Stablizing Credit Costs and Trading Played Into Citigroup’s Q3

Citigroup Inc. (NYSE: C | C Price Prediction) reported its third-quarter financial results before the markets opened on Tuesday. The bank said that it had $1.40 in earnings per share (EPS) and $17.3 billion in revenue, while consensus estimates had called for $0.92 in EPS and $17.22 billion in revenue. The same period of last year reportedly had $2.07 in EPS and $18.57 billion in revenue.

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Management noted that although Global Consumer Banking revenues remained lower as a result of the pandemic, it did see higher activity in its mortgage and wealth management products. The Institutional Clients Group again had very strong performance, especially in Markets, Investment Banking and the Private Bank.

One thing that stands out in this report was that the Markets and Securities Services (a subset of Institutional Clients Group) saw revenues increase 18% to $5.2 billion. Fixed Income Markets revenues of $3.8 billion increased 18%, reflecting a strong performance across spread products and commodities.

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In terms of its segments, the bank reported as follows:

• Global Consumer Banking revenues decreased 13% year over year to $7.17 billion.
• Institutional Clients Group revenues increased by 5% to $10.35 billion.
• Corporate/Other had negative revenues of $224 million, a drop from $434 in revenue in the third quarter of last year.

Citigroup’s end-of-period loans totaled $667 billion as of quarter’s end, down 4% from last year. End-of-period deposits were $1.3 trillion, an increase of 16%.

Citigroup’s allowance for credit losses on loans was $26.4 billion at quarter’s end, or 4.00% of total loans, compared to $12.5 billion, or 1.82% of total loans, at the end of the prior-year period. Note that these numbers were more or less the same as the prior quarter, which is a sign of stablization, a net positive during this pandemic.

Book value per share increased 1% year over year to $84.48, and tangible book value per share increased 1% to $71.95. This was driven largely by a reduction in outstanding common stock.

Citigroup stock traded down 3.7% Tuesday morning, at $44.18, in a 52-week range of $32.00 to $83.11. The consensus price target is $65.60.

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