Citigroup profit soars as lower costs trump revenue fall

Citigroup Inc, the No 3 US bank by assets, reported a 51 percent jump in quarterly profit as lower costs more than made up for a fall in revenue amid increased market volatility and uncertainty about the timing of a US interest rate hike. Citi's legal and related costs plunged to $376 million in the third quarter from $1.6 billion a year earlier, with the lender, under Chief Executive Michael Corbat, putting most of the problems stemming from the financial crisis behind it.
Operating expenses fell 18 percent as the bank exited businesses where profits and prospects were not worthwhile. US banks including Citi, JPMorgan Chase & Co and Bank of America Corp are cutting costs to boost earnings as overnight fund rates stay near zero and fixed-income trading, long a source of revenue growth, shows no sign of picking up.
Citi shares rose as much as 2.5 percent in morning trading on Thursday. Revenue fell in two of the bank's three units. However, the revenue decline in Citicorp, its largest unit that holds core businesses, was the smallest at 2 percent. Citi Holdings, "the bad bank" that holds Citi's assets marked for sale, saw the biggest plunge in revenue, a steep 32 percent, as assets in the unit shrank 20 percent.
"Revenue performance was solid while expenses remained in check and credit trends continued to generally move in the right direction," RBC Capital Markets analyst Gerard Cassidy wrote in a note. Citi's institutional clients group was the only unit to post a rise in revenue, helped by higher private banking and equity market income. Revenue from fixed income markets fell about 16 percent to $2.58 billion, reflecting a trend seen in the results of other big US banks.
Goldman Sachs Group Inc, which also reported results on Thursday, said bond trading revenue fell 33 percent. JPMorgan and BofA also reported a fall in third-quarter revenue this week, hurt by muted trading. Citi's adjusted return-on-assets rose to 0.91 percent from 0.64 percent, meeting Corbat's target of at least 0.9 percent for the year.