Citigroup Profits Rise on Consumer Growth
NEW YORK (Reuters) - Citigroup Inc. (NYSE:C - News), the No. 1 U.S. financial services firm, on Wednesday posted a 15 percent rise in quarterly profits, as growth in consumer lending and bonds businesses offset dwindling stock market-related revenues.
The New York-based company, which runs banking, brokerage and insurance operations in more than 100 countries, earned $4.08 billion, or 78 cents a share, in the second quarter, including the release of a $25 million restructuring reserve. That compared with $3.54 billion, or 69 cents a share, in the year-ago quarter, also including one-time items.
"Results were remarkably good under the circumstances," UBS Warburg analyst Diane Glossman said. "(The) Consumer (business) still seems to be screaming ahead. The company also continues to be distinguished by superior operating leverage, and credit quality wasn't awful. When you consider all the things people are afraid of, all of that is pretty remarkable."
The lowest U.S. interest rates in about 40 years have made it cheaper for banks to borrow, spurring demand for consumer loans like mortgages and credit cards, and also boosted bond issuance businesses at its investment banking unit. This largely offset corporate loan losses in the slack economy and a stock market slump that dented trading and investment results.
Excluding one-time items, Citigroup earned $4.06 billion, or 78 cents a share, in the second quarter, compared with $3.79 billion, or 74 cents a share, a year ago.
Wall Street expected Citigroup to earn between 74 cents and 81 cents a share, with an average estimate of 77 cents, according to market data firm Thomson First Call.
WORLDCOM WRITE-DOWN
Second-quarter operating and net income include $167 million in charges, or 3 cents a share, for the writedown of telecommunications provider WorldCom Group (NasdaqNM:WCOME - News) bonds held at Citigroup's insurance investment portfolio, as well as credit and trading-related losses at its corporate and investment bank. WorldCom recently disclosed a massive accounting fraud scandal.
Citigroup's stock closed at $36.20 a share on Tuesday. The shares have dropped about 23 percent in the first half of the year, underperforming the benchmark Standard & Poor's 500 index, which fell about 14 percent in the same period.
Income at Citigroup's consumer operations, including credit cards, rose 25 percent to $2.01 billion while profits at its corporate and investment bank rose 4 percent to $1.45 billion. Money management profits rose 23 percent to $505 million.