Citi profits plunge after $7bn mortgage settlement
Published 15/07/2014 | 02:30
Citigroup's quarterly earnings plunged 96pc, hurt largely by a $7bn mortgage settlement and 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 estimates. Citigroup shares rose.
While the trading results topped expectations, revenue from stock and bond trading declined. And profit for Citigroup's main businesses, known as Citicorp, fell 23pc in the second quarter, as revenue slid 8pc and expenses rose 4pc.
The results underscored how much work chief executive Michael Corbat still has to do to fix the third largest US bank, which has been struggling to contain its costs for more than a decade.
Net income to common shareholders totalled $80m compared with $4.09bn in the same quarter last year. Excluding the bank's $7bn settlement with the US 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 compared with the average analyst estimate of $1.05. The bank's settlement with the US government over shoddy mortgages resulted in a $3.8bn charge, before taxes.
But there were signs of weakness in the bank's continuing operations, including a 46pc decline in retail banking income to $362m from the same quarter last year, hurt by falling fee income. Merger advisory revenue fell 10pc to $193m. Overall institutional client group revenue fell 7pc, excluding accounting adjustments.