Citigroup beats estimates on credit card, trading revenue growth

NEW YORK: Citigroup Inc beat analysts’ estimates for fourth-quarter profit on Tuesday, boosted by growth in its credit card business and a jump in trading revenue.

North American branded cards, which account for a majority of the bank’s consumer banking revenue, clocked double-digit revenue growth for the second straight quarter, rising 10% from a year earlier.

The third-largest US bank by assets has been leveraging its robust card business to help grow deposits by pitching checking and savings accounts to cardholders.

Trading revenue rose nearly 31% as markets steadied during the last three months of 2019, with the gains driven by a 49% surge in fixed-income trading. Equities trading fell 23% due to weak performance in derivatives.

Rival Wall Street bank JP Morgan Chase & Co also reported an increase in trading revenue on Monday.

The largest US bank by assets said revenue from bond trading surged 86% from a year earlier, when financial markets were roiled by a selloff triggered by concerns over trade and global growth. Revenue from its equities business rose 15% to US$1.5 billion.

Citi also reached a key profitability target. The bank hit a return on tangible common equity (ROTCE) of 12.1% for 2019, above the goal of 12% it promised investors for the year.

ROTCE is a widely watched measure of how well a bank uses shareholder money to generate profits.

The lender’s shares rose 1.5% in early trading.

Citi added loans and deposits in the most recent quarter. Total end-of-period loans grew 2%, while deposits jumped 6%, excluding foreign-exchange fluctuations. Credit costs jumped 15%.

Total loans, excluding home lending, rose 3% at JPMorgan.

Net interest income, or the difference between what a bank pays for deposits and earns from loans, was up 1% at Citi, compared with declines at JPMorgan and Wells Fargo & Co.

The US Federal Reserve cut interest rates three times last year, crimping banks’ lending margins and their ability to raise revenue.

Net income applicable to common shareholders rose to US$4.98 billion, or US$2.15 per share, in the three months ended Dec 31, from US$4.31 billion, or US$1.64 per share, a year earlier.

Excluding the impact of a tax benefit, Citi earned US$1.90 per share.

Revenue, net of interest expense, rose about 7% to US$18.38 billion.

Analysts had expected a profit of US$1.84 per share and revenue of US$17.86 billion, according to IBES data from Refinitiv.