Citigroup profits beat forecasts after consumer spending offsets deals slump

Citigroup said strong consumer spending and corporate activity drove profits in the first three months of this year, even as a lack of deals and increased credit costs weighed on its bottom line.

The US bank said on Friday that net income in the first quarter rose to $4.6bn, or $2.19 per share. That was up 7 per cent from the same three months a year ago. It was also far better than the $1.67 analysts were expecting from the company in the period.

However, Citi’s profits included a sizeable gain from planned sales, most notably its consumer banking business in India. Excluding those one-time gains, Citi’s bottom line still outpaced expectations but was down 10 per cent from what the bank earned in the first quarter a year ago.

Citi’s quarterly revenue rose 12 per cent to $21.4bn, which was also better than analysts had anticipated.

JPMorgan Chase and Wells Fargo also reported first-quarter results on Friday that beat expectations.

Citi bucked the expected trend in another closely watched area of banking these days: deposits. Most analysts had forecast that the big banks would see a drop in deposits in the first three months of the year, as savers switched to money market funds and other higher-yielding investments. Citi’s deposits, however, were essentially unchanged from a year ago.

Citi did lose some consumer deposits but that was balanced out by an increase in deposits from corporate clients, likely to have been driven by the collapse of Silicon Valley Bank and the financial troubles of other regional lenders.

JPMorgan reported a $37bn jump in deposits in the first quarter, likely helped by troubles at smaller rivals as well.

Citi, like its peers, continued to suffer from a lacklustre dealmaking environment, driven by rising interest rates, as well as the disruption in financial markets during the quarter of the biggest bank failures in more than a decade.

Revenue from investment banking at Citi was just under $475bn, which was down 25 per cent from the same period last year. Despite the rocky market, Citi was able to turn in a solid quarter when it came to debt and commodities trading, which generated $4.5bn in revenue in the quarter, about $500mn more than expectations.

But the biggest driver of Citi’s profits in the quarter appeared to be the resilient economy.

Citi’s consumer customers spent almost 10 per cent more on their credit cards than they did in the same period a year ago. Revenue from corporate transactions services also jumped, up more than 30 per cent in the quarter from the same period a year ago. Citi’s transaction services group also continued to get a boost from higher interest rates.

Citi’s shares were trading up nearly 3 per cent in pre-market trading, at $48.55.

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