The Banking Executive Magazine, Issue 154, October 2021

Windows 11 Citigroup POSTS 48% JUMP IN PROFIT ON RESERVE RELEASE Citigroup Inc reported a 48% jump in third-quarter profit that comfort- ably beat market estimates, as the bank released loan loss reserves and reaped a windfall of fees from equity underwriting and investment bank- ing advice. The reserve release and boost from M&A offset declines at its consumer bank as cash-flush customers paid down loans, resulting in lower inter- est income for the bank. Customers have been using money saved when stuck at home during the pandemic to pay down balances to reduce interest payments or avoid late fees. This has hurt lending in- come of lenders with large consumer businesses. However, there were some positive signs for the bank. Cards purchase sales rose 20% as consumer spend- ing picked up during the quarter. Ex- ecutives at other large U.S. banks have also indicated that consumers have started to show signs of taking on more debt, while their cash bal- ances are diminishing. "While strong consumer balance sheets have impacted lending, we are seeing higher consumer spending across our cards products," said Chief Executive Officer Jane Fraser. For the three months ended Sept. 30, net income jumped 48% to $4.6 bil- lion, or $2.15 per share, from $3.1 billion, or $1.36 per share, a year earlier. Analysts on average had ex- pected a profit of $1.65 per share, according to Refinitiv IBES data. Citi's shares were up nearly 1.5% fol- lowing the results. The bank took down $1.16 billion of loss reserves built during the pan- demic for potentially sour loans that have not materialized. A year earlier Citigroup had added $436 million to its reserves. JPMorgan Chase, Bank of America and Wells Fargo have also released funds set aside during the pandemic. Investment banking revenue at Citi- group increased 39% to $1.9 billion, helping offset a 16% decline in fixed- income revenue from a year earlier when there was unprecedented volatility in the markets. Higher expenses and lower net inter- est revenue also weighed on the re- sults. Net interest revenue declined 1% from a year earlier, but was 2% more than in the second quarter, suggest- ing an end to the downward trend that started when the pandemic began and the Federal Reserve cut interest rates to near zero and many borrowers paid down their loan bal- ances. Lower interest rates also hurt Citi- the BANKING EXECUTIVE 40 ISSUE 154 OCTOBER 2021