Citigroup profit drops on bigger stockpiles for potential loan losses

Citigroup's (C) profit fell 9% in the third quarter as it set aside more money to cover loans that may not be repaid, particularly on credit cards.

The third-largest US lender's net income dropped to $3.2 billion, or $1.51 per share, compared with $3.5 billion, or $1.63 per share, a year earlier, it reported on Tuesday.

"In a pivotal year, this quarter contains multiple proof points that we are moving in the right direction and that our strategy is gaining traction," CEO Jane Fraser said in a statement. Citi shares were last up 2% in premarket trading after results.

Revenue rose 1% to $20.3 billion.

Citi's dealmakers joined rivals at JPMorgan Chase and Wells Fargo in benefiting from a rebound in capital markets as corporate clients issued more debt and equity.

Investment banking was a bright spot for the second straight quarter, with revenue jumped 31% to $934 million. Wall Street executives are optimistic that the Federal Reserve's interest-rate cut last month will pave the way for more deals and initial public offerings.

Services revenue climbed 8% to $5 billion, fueled by a 24% surge in revenue for securities services to $1.4 billion.

A stock-market rally at the end of the quarter propelled equities trading revenue up 32% to $1.2 billion, lifting overall markets revenue 1%.

But bond trading revenue lagged, falling 6% to $3.6 billion.

In the US retail banking division, revenue climbed 3% to $5 billion, buoyed by 8% growth in credit card revenue to $2.7 billion.

Meanwhile, retail banking revenues fell 8%, and in the retail services arm handling credit card partnerships, revenue slipped 1%.

Citi's total allowance for credit losses was about $22.1 billion at the end of the third quarter, compared with $20.2 billion a year earlier.

Its wealth management division, a key part of Fraser's growth strategy, posted revenue growth of 9% in the quarter to $2 billion.

Fraser has sought to grow profits, simplify the company and fix its longstanding regulatory problems.

On Friday, Bank of America's profit in the third quarter fell on the back of lower interest income. Earnings at rival JPMorgan Chase and Wells Fargo beat estimates last week, underpinned by strong consumer finances.

REGULATORY EFFORTS

In 2020, the Office of the Comptroller of the Currency and the Federal Reserve fined Citi $400 million and ordered the bank to fix persistent risk management and data governance failures.

Total operating expenses declined 2% in the third quarter.

The regulators again fined Citi in July for failing to make enough headway on those problems. It got some relief when the Federal Reserve terminated a 2013 enforcement action on the bank's anti-money laundering programs earlier this month.