(Adds CFO Commentary to Sections 3-4, Analyst Commentary to Section 7, Stock Movement to Section 8) by Manya Saini and Tatiana Bautzer
NEW YORK, Oct 13 (Reuters) – Citigroup CN’s third-quarter profit beat estimates on Friday, helped by a rise in trading income and investment banking fees as it undertook its biggest overhaul in decades.
The bank said it would reduce the number of management levels from 13 to eight as part of a radical reorganisation. In the first two levels of management, 15% of functional roles were reduced, Citi said in a presentation, and it eliminated 60 committees.
Citi Chief Financial Officer Mark Mason told reporters in a phone call that it was a “very good quarter” for the bank’s markets division as volatility rose, boosting the performance of fixed income and commodities.
U.S. consumer economies remain healthy amid a generally uncertain environment, Mason said on a conference call. “The United States never ceases to amaze us with its resilience,” he said. However, the bank expects a minor recession in the first half of next year.
The third-largest US bank set aside more money to cover bad loans, but said delinquencies were still low compared with historic levels. Citi’s total allowance for the credit portfolio rose to $17.6 billion from $16.3 billion a year earlier.
America’s banking giants have benefited from the Federal Reserve’s campaign to curb inflation, which has driven up borrowing costs and allowed banks to earn more on interest paid by customers.
Citi raised its forecast for net interest income (NII) this year to more than $47.5 billion, from $46 billion excluding markets. It also expects a modest level of buybacks in the fourth quarter, Mr. Mason.
“The market will see these results as better than expected and the change in the NII revenue forecast as constructive, as it implies a better distribution of revenue in a more uncertain macroeconomic environment,” Goldman Sachs analysts said.
The Citi share rose 3.2 per cent.
NET PROFIT ABOVE ESTIMATE
Citi’s net income rose 2% to $3.5 billion from a year earlier, while earnings per share Shares were flat at $1.63 per share. stock. On an adjusted basis, it earned $1.52 per share, beating LSEG’s estimate of $1.21.
Revenue in Citi’s institutional client group, which houses its Wall Street operations, rose 12% from a year earlier, driven by a 10% increase in trading revenue to $4.5 billion. Interest income increased by 14 per cent.
Citi’s total revenue rose 9% to $20.1 billion. That’s better than expected, Oppenheimer analyst Chris Kotowski wrote in a note.
Investment banking fees rose 34 per cent. The profit was a bright spot after several quarters of declining transactions.
Revenue in the personal banking and wealth management division rose 10% to DKK 6.8 billion. At the end of the third quarter, deposits totaled $1.3 trillion, down 3% from a year earlier, as customers shifted to higher-yielding assets.
Last month, chief executive Jane Fraser announced a major reorganization (), which will dismantle the institutional client group and allow it to exercise more direct control over the company’s operations. The new structure has not yet been reflected in the results for the third quarter.
Citi will provide estimates of the extent of layoffs and savings in the fourth quarter.
Fraser said there was “no room for bystanders” as the bank embarked on its biggest restructuring in almost two decades. The changes are being implemented at a time of economic uncertainty that has weighed on some of Citi’s key businesses, such as trading.
Expenses rose 6% to $13.5 billion, driven by higher costs and investments in control systems. They include severance pay for employees who have been made redundant following the sale of certain international consumer-related businesses. Citi is winding down its sales in Asia.
Its rivals Wells Fargo WFC.N and JPMorgan Chase
JPM.N also reported higher quarterly profits on Friday, boosted by a rise in interest payments.