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Citigroup (C) earnings Q3 2022

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Citigroup said Friday that its third-quarter earnings fell 25% because it bulked up its credit loss provisions and investment banking slumped.

Nevertheless, Citi shares ticked up 0.65% as revenue climbed greater than analysts expected, helped by rising rates of interest, and earnings per share topped Wall Street expectations.

The bank reported $18.51 billion in revenue versus the $18.25 billion expected by analysts, based on Refinitiv. This was up 6% 12 months over 12 months.

Within the quarter ended Sept. 30, net income fell 25% 12 months over 12 months to $3.48 billion, or $1.63 in earnings per share.

The outcomes included a $520 million pretax gain on the sale of its Asia consumer business. Excluding this item, Citi said it earned $1.50 per share. That adjusted number got here in ahead of analyst expectations of $1.42 per share, based on Refinitiv.

The decline in profit got here partly from a rise in loan loss reserves. Citigroup grew its allowance for credit losses by a net of $370 million throughout the quarter, compared with a release of greater than $1 billion in the identical period last 12 months. The full credit loss provision for the quarter got here in at $1.37 billion.

On the trading front, Citigroup reported $3.06 billion in fixed income revenue and $1.01 billion in equities revenue. Analysts were expecting revenue of $3.19 billion and $965 million, respectively, based on StreetAccount.

Personal banking was a shiny spot for Citi, as revenue rose 10% 12 months over 12 months to $4.33 billion, reflecting growing net interest income as rates of interest have climbed.

Bank stocks have been hammered this 12 months over concerns that the U.S. is facing a recession, which might result in a surge in loan losses. Citigroup shares have slumped 29% this 12 months, leaving it by far the lowest-valued amongst its U.S. peers.

The potential for a worldwide economic slowdown as central banks all over the world battle inflation could hamper CEO Jane Fraser’s turnaround efforts at Citigroup. Fraser, who took over the Recent York-based bank last 12 months, has announced plans to exit retail banking markets outside the U.S. and set medium-term return targets in March.

“There may be accumulating evidence of slowing global growth, and we now expect to experience rolling country-level recessions starting this quarter,” Fraser said on an investor call Friday. She added that the U.S. was in relatively strong shape but still might see a “mild recession” within the second half of 2023.

The sale of its consumer business within the Philippines was the first driver of revenue growth within the quarter, Citi said. Last 12 months, it posted a loss on its sale of an Australian business. The bank also said it’s ending nearly all institutional client services in Russia by the top of the primary quarter of next 12 months.

Even after its restructuring, Citigroup has more overseas operations than its rivals, leaving it more exposed to slowing economies because the impact of a surging U.S. dollar ripples all over the world. Volatility within the British bond market, and an emergency motion by the Bank of England, have been essentially the most high profile example of market stress to this point.

“We’re more focused on the liquidity out there in the intervening time, and the impact on some counterparties, rather more than we’re on credit risk,” Fraser said.

Like the remaining of the industry, Citigroup can be contending with a pointy decline in investment banking revenue. The bank reported $631 million in investment banking revenue for the third quarter, down greater than 60% 12 months over 12 months. Chief financial officer Mark Mason said that Citi was gaining market share in institutional clients business.

JPMorgan and Wells Fargo beat revenue estimates for the third quarter on Friday, while Morgan Stanley missed estimates on the highest and bottom lines. Bank of America reports Monday and Goldman Sachs Tuesday.

Read Citi’s press release here.

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