Turbulent Citibank (C.US) deals are “full of pots”, supporting good Q1 results and getting closer to profit targets

The Zhitong Finance App learned that Citigroup (C.US) announced its first quarter earnings report before the market on Tuesday EST, taking another step towards key profit goals. Among them, traders' performance exceeded expectations, while wealth management and retail business revenue reached record highs. According to the data, Citi's revenue for the first quarter increased 3% to US$21.6 billion, exceeding the average market forecast of US$21.29 billion, and net profit increased 21% to US$4.1 billion. Earnings per share were US$1.96, far higher than analysts' average expectation of US$1.84.

The trading sector capitalized on the volatile waves of the global market and reached $6 billion in revenue for the quarter. Among them, revenue from the fixed income business increased by 8%, and revenue from stock trading increased by 23%. This result exceeded Bloomberg's average analysts' estimate of US$5.74 billion.

In the wealth management business that CEO Jane Fraser (Jane Fraser) focuses on, revenue jumped 24% to a record $2.1 billion. The biggest increase was in the bank's “Workplace Wealth” division, which provides tailored advice to lawyers and professional services firms.

Taken together, these results raised Citigroup's return on tangible common equity (a key measure of profitability) to 9.1% this quarter. Fraser has set a goal to raise this indicator to 10% - 11% by the end of next year, making it more competitive compared to its peers.

To achieve this goal, she restructured the bank, hired external leaders, and cut thousands of jobs. The company is also overhauling back-office operations and control systems in an effort to get rid of long-standing regulatory penalties.

As of press release, Citibank's stock price has risen slightly, up nearly 2%.

The company's fixed income traders generated $4.5 billion in revenue and stock traders contributed $1.5 billion, all exceeding expectations. However, Citigroup is making efforts to expand its institutional brokerage business, but the increase in its stock business revenue still lags behind rivals JPMorgan Chase (JPM.US) and Morgan Stanley (MS.US). Both companies increased their stock business revenue by more than 40%.

As uncertainty brought about by Donald Trump's trade policies dampened some trading activity, bond and stock underwriting revenue declined this quarter. The large-scale trade war initiated by the US president has disrupted the market and raised concerns that the US may fall into recession.

Despite this, revenue from the company's investment banking division increased 12% to $2 billion, mainly due to fees from mergers and acquisitions completed this quarter.

“When the dust settles and long-standing trade imbalances and other structural adjustments are a thing of the past, the US will still be the world's leading economy, and the US dollar will continue to be the reserve currency,” Fraser said in a statement.

Increased provision

Citigroup also provided $2.7 billion for non-performing loans, an increase of 15% over the same period last year, higher than the 9% increase expected by analysts.

The company's US personal banking business reached a record revenue of $5.2 billion this quarter. Despite an 11% drop in revenue from its retail services division, the results are still impressive. The retail services division partners with companies such as Home Depot (HD.US) and Best Buy (BBY.US) to provide co-branded credit cards and private label credit card services.

The “Services” department is the most profitable of Citibank's five major divisions. It is responsible for large-scale capital transfer operations. This quarter's revenue recorded the best results in the first quarter in ten years.