Citigroup earnings top the Street as credit costs from the pandemic stabilize

Michael Corbat, CEO, Citigroup, speaking at the World Economic Forum in Davos, Switzerland, January 21, 2020.

Adam Galica | CNBC

Citigroup reported on Tuesday better-than-expected results for the third quarter, sending the stock up more than 2%, as the company’s credit costs from the pandemic stabilized.

Here’s how the banking giant’s results compared to Wall Street estimates:

  • Earnings: $1.40 per share vs. 93 cents a share expected, according to Refinitiv.
  • Revenue: $17.3 billion vs. $17.2 billion expected

It was not immediately clear whether those results were directly comparable to the analysts’ estimates because Citi said that earnings figure includes a $400 million civil penalty. However, if that penalty is excluded, the earnings topped Wall Street estimates by an even greater amount.

“We continue to navigate the effects of the COVID-19 pandemic extremely well. Credit costs have stabilized; deposits continued to increase,” CEO Michael Corbat said in a statement.

Citigroup reported that net credit losses declined to $1.9 billion in the third quarter from $2.2 billion in previous three-month period. The company’s overall cost of credit also dropped to $2.26 billion from $7.9 billion on a quarter-over-quarter basis.

Meanwhile, trading revenues for the bank’s fixed income and equities divisions topped expectations as well. Fixed income trading yielded revenue of $3.8 billion while equities raked in $875 million in sales. Analysts polled by FactSet expected fixed income and equities trading revenues to come in at $3.5 billion and $851 million, respectively.

Citigroup’s results come in the midst of a major management change for the third-biggest U.S. bank by assets.

Last month, the bank announced that longtime CEO Corbat would be replaced by his deputy Jane Fraser in February, marking the first big Wall Street bank to have a female CEO.

Corbat’s departure was hastened by a sagging share price and pressure from regulators, CNBC reported last month. Last week, the bank agreed to pay a $400 million penalty for failing to address “several longstanding deficiencies” in its risk controls.

Besides forcing it to improve its risk management, regulators can now reject acquisitions sought by the bank and push for changes to management or the board if necessary.

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