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By David Henry and Tanya Agrawal
July 14 Citigroup Inc said on Monday that
quarterly earnings fell 96 percent, hurt largely by a $7 billion
mortgage settlement, but also by declining income in most of its
main businesses including stock trading and retail banking.
There were bright spots in the results, including better-
than-expected stock and bond trading results, which helped the
bank post adjusted earnings that beat the average analyst
estimate. Citigroup shares rose 3.7 percent to $48.74.
While the trading results topped expectations, revenue from
stock and bond trading declined. And profit for Citigroup's main
businesses, known as Citicorp, fell 23 percent in the second
quarter, as revenue slid 8 percent and expenses rose 4 percent.
The results underscored how much work Chief Executive
Officer Michael Corbat still has to do to fix the third largest
U.S. bank, which has been struggling to contain its costs for
more than a decade.
Net income to common shareholders totaled $80 million, or 3
cents a share, compared with $4.09 billion, or $1.34 a share, in
the same quarter last year.
Excluding the bank's $7 billion settlement with the U.S.
government as well as accounting adjustments to trading results
that reflected the changing market value of the bank's debt,
Citi posted earnings of $1.24 per share. That compared with the
average analyst estimate of $1.05 a share, according to Thomson
The bank's settlement with the U.S. government over shoddy
mortgages resulted in a $3.8 billion charge, before taxes.
SIGNS OF WEAKNESS
But there were signs of weakness in the bank's continuing
operations, including a 46 percent decline in retail banking
income to $362 million from the same quarter last year, hurt by
falling fee income.
Merger advisory revenue fell 10 percent to $193 million.
Overall institutional client group revenue, including investment
banking, sales and trading, and processing, dropped 7 percent,
excluding accounting adjustments.
Among the bright spots in its earnings report, revenue from
stock and bond trading fell less than the company expected. The
drop was 15 percent, excluding an accounting adjustment, while
Chief Financial Officer John Gerspach had forecast a decline of
roughly 20 percent to 25 percent in May.
In a call with reporters, Gerspach attributed
better-than-expected trading performance to eased tensions in
Russia and Ukraine during the latter part of the quarter.
Citi's fixed-income results were the first to be reported by
a major U.S. investment bank for the second quarter and may
point to how competitors fared. Wells Fargo & Co posted
results on Friday, but its bond trading business is much
smaller, and it does not disclose results from the segment.
Fixed income trading has slumped industrywide as trading
volumes fell and interest rates and bond yields remained
relatively steady globally. New rules imposed by regulators to
protect the banking system after the financial crisis have also
cut into profits in the business.
Citi Holdings, which houses assets the bank is looking to
shed, posted a $3.48 billion net loss, compared with a $582
million loss in the same quarter last year, mainly due to the
Excluding the settlement, the unit posted income of $244
million, as revenue rose and operating costs fell. Assets in the
unit were $111 billion at the end of the second quarter,
compared with $114 billion in the first quarter of 2014.
(Reporting by David Henry and Tanya Agrawal; Editing by Ted
Kerr, Dan Wilchins and Jeffrey Benkoe)