Citigroup profits rise, helped by higher interest rates
Banking conglomerate Citigroup said its second-quarter profits rose by 7 per cent from a year ago, helped by higher interest rates, a lower tax rate and a strong economy.
Citigroup is the first of the big Wall Street banks to report results this week. All the major banks are expected to report higher profit from a year ago, but investors are expected to focus on each of the bank’s outlook, especially with the global economy slowing down and the Federal Reserve considering lowering interest rates.
Citi said Monday it earned a profit of US$4.8 billion, or US$1.95 a share. That’s up from US$4.49 billion, or US$1.63 per share, in the similar period a year earlier. That’s better than the US$1.81 per share that analysts were forecasting for the bank, according to FactSet.
Excluding a one-time gain related to its investment in a trading platform known as Tradeweb, Citi reported a four per cent decline in trading. The decline was expected, as the bank previously warned that investors remain cautious and weren’t willing to make big bets in the market with the uncertainty in the economy.
Citi’s global consumer banking franchise also did well, reporting a three per cent increase in revenue and an 11 per cent increase in profits. The revenue increase was in part caused by Citi benefiting from higher interest rates, as more consumers are now carrying balances on credit cards thatcollect interest.
But the interest-collecting machine may be under threat. The United States Federal Reserve is heavily considering lowering interest rates later this month for the first time in a decade, in order to keep the US economy from slowing down further. Banks have benefited for the last few years from steadily rising interest rates, which allows them to charge borrowers more to borrow. If the Fed cuts rates, it will force banks to cut their interest rates as well.
That said, consumers still appear willing to borrow. The bank reported higher deposits and loans from a year ago.
Total revenue across the bank in the quarter was US$18.76 billion, up two per cent from a year earlier. That’s better than the US$18.5 billion that analysts were expecting.