NEW YORK--Citigroup Inc topped expectations for quarterly profit on Monday as a tight lid on costs and strength in consumer lending helped the third-largest U.S. bank counter weakness in its trading business.
New York-based Citi is the first major bank to report second-quarter earnings. Fellow Wall Street titans JPMorgan Chase & Co, Bank of America Corp and Goldman Sachs Group Inc report later in the week.
Bank stocks have lagged the market in recent weeks on concerns that net interest margins, a key measure of bank profitability, have peaked as the Fed gets ready to start cutting interest rates. Citi's interest margin declined slightly to 2.67% from 2.70% a year earlier and 2.72% in the first quarter of 2019. But the bank was able to make more money from its lending activities during the quarter and net interest income rose 2%.
Overall revenue rose 2% to $18.76 billion, driven by 4% growth in Citi's consumer business as customers spent more on their credit cards. Branded card revenue jumped 7% as more customers initially attracted with promotional offers started paying interest. Interest-earning card balances rose 10%.
Strength in its consumer sector helped offset softness in Citi's Wall Street business and corporate banking. Trading revenue remained challenged for a third consecutive quarter. Fixed-income trading fell 4%, excluding a gain from Citi's investment in Tradeweb, while equities revenue declined 9%.
Corporate lending was 9% lower than the year-ago period. Citigroup Chief Financial Officer Mark Mason told reporters on a call that trade tensions have discouraged some corporate customers from taking out loans.
"There's a bit of caution that many of the corporate clients are exercising, in particularly in Asia," Mason said. He said Citigroup's loans to corporate clients in Asia were down about 5%, partly because of aggressive pricing by competitors, but also because of "some of the trade tensions."
Overall, Citi continued to add loans and deposits in the most recent quarter, allaying concerns that a weaker economic outlook was hurting consumers' ability to borrow. Firmwide loans rose 3% to $689 billion, while deposits increased 5%, excluding foreign exchange fluctuations.
