A number of financial companies are reporting Q3 earnings
today. We wanted to take a closer look at Citigroup (C 68.90, +0.53, +0.77%).
Citigroup is a global diversified financial services company. Its businesses provide a broad catalog of financial products and services, including consumer banking and credit, corporate and investment banking, securities brokerage, trade and securities services, and wealth management, to clients ranging from consumers to corporations, governments, and institutions. Citi has approximately 200 mln customer accounts and does business in more than 160 countries and jurisdictions.
Citigroup has two primary business segments: Global Consumer Banking (GCB) and Institutional Clients Group (ICG), with remaining operations classed as Corporate/Other. Its GCB segment consists of retail banking and wealth management, including small business and commercial banking, residential real estate, and asset management in Latin America. It also includes Citi-branded credit cards and Citi retail services. Its ICG segment includes other aspects of banking, such as investment banking, corporate lending, and private banks as well as treasury and trade solutions, and markets and securities services. Its Corporate/Other segment includes treasury, operations and technology, and some legacy non-core assets (consumer loans/portfolios, etc.).
Turning to the Q3 results, EPS rose 22% year/year to $1.73, which was better than market expectations. Revenue fell 0.2% year/year to $18.39 bln, which was slightly below expectations. Revenues were largely unchanged; however, if you back out a couple of gain on sale items, revenue grew 4% driven by growth in the Institutional Clients Group.
Results this quarter showed solid year/year revenue growth across many of Citi's businesses, including fixed income, treasury and trade solutions, securities services, private banking, and its consumer franchise in Mexico. Citi also grew loans and deposits while continuing to manage risk, as demonstrated by the stability of its credit portfolio.
Breaking it down by segment, GCB revenue of $8.7 bln increased 2% on a reported basis and 3% in constant dollars, driven primarily by strength in Latin America GCB, as well as the previously mentioned gain on sale. North America GCB revenues of $5.1 bln decreased 1%, as higher revenues in Citi retail services were more than offset by lower revenues in Citi-branded cards and retail banking.
ICG revenue of $9.2 bln decreased 2%. Excluding the previously mentioned gain on sale in the prior-year period, revenues grew 4%, driven by growth in markets and securities services as well as banking. Banking revenue of $4.8 bln increased 1% as continued growth across businesses more than offset a decline in investment banking. Corporate / Other revenue of $494 mln decreased 5%, driven by the wind-down of legacy assets.
In sum, with the stock trading modestly higher in the pre-market and into the morning session, it seems that investors are happy with Citigroup's Q3 earnings report. The EPS upside in Q3 was quite good, and Citi has now posted strong EPS upside for seven consecutive quarters. The revenue upside has been more muted. Overall, the Q3 results were pretty good.
Citi has also actively been returning cash to shareholders. Specifically, $6.4 bln of capital has been returned through buybacks and dividends. And over the past twelve months, Citi has reduced its common shares outstanding by over 200 mln, or 8%. This has helped Citi post that strong EPS growth. The stock has been pretty much trading sideways since mid-March and has been weak in recent days alongside with the overall weakness in the market. Investors are likely pleased to see some modest gains this morning.
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