Citi Group Profit: On Friday, Citigroup Inc reported a first-quarter profit that above Wall Street forecasts thanks to rising interest payments from its lending customers.
Despite a 23% increase in net interest income to $13.3 billion, Citi increased its provision for loan losses to $241 million from $138 million in the prior year. In anticipation of a possible recession and the possibility of customers and companies falling behind on payments later this year, it joined other financial titans in taking precautions.
According to Refinitiv statistics, Citi’s first-quarter earnings per share of $1.86 above analysts’ average forecast of $1.67. In the three months ending on March 31st, net income increased from $4.3 billion, or $2.02 per share, the previous year to $4.6 billion, or $2.19 per share.
Citi “reported the weakest growth of the three (banks reporting on Friday) – but still better than expected” and “managed to buy back $1B of stock,” according to Thomas Hayes, chairman and managing member at Great Hill Capital. The bears’ hearts have been stabbed by today’s bank earnings.
Similarly, asset sales helped boost Citi’s legacy franchises unit revenue by 48% to $2.9 billion. The sale of the bank’s Indian consumer division to Axis was announced on March 1st. The bank projected a gain of $1.4 billion from the deal at the time.
The collapse of Silicon Valley Bank and Signature Bank last month shocked the banking industry and erased billions of dollars in market value. In Europe, competitor UBS Group AG rescued Credit Suisse with government backing.
Due to investors shifting their assets to money market funds in search of higher rates, the lender saw a stagnation in deposit growth, with $1.33 trillion in both the most recent quarter and a year earlier. Its loans also decreased, to $652 billion from $654 billion.
In the next quarters, analysts predict that the industry-wide demand for loans would decrease, putting downward pressure on net interest margins (NIM).
“The banking crisis may take attention away from the efforts for a short period of time, but in the long run, this crisis will show where Citigroup’s strengths lie by acting as a major stress test and will assist in simplifying operations in the long run,” says Mona Dajani, a partner at the New York law firm Shearman & Sterling LLP.
Due to the slowest transaction market in over a decade, Citi’s investment banking income fell 25% from $774 million in the previous year.
Dealogic data shows that it dropped four spots to ninth place among financial advisors in 2023 as measured by deal value.
