Citigroup reported better-than-expected results on Friday after a strong performance in trading as executives called US consumption healthy despite rising inflation.
The big U.S. bank, like its peers, also suffered a second-quarter profit decline from the year-ago period, spurred by repayments of funds set aside in case of loan defaults early in the pandemic.
But unlike JPMorgan Chase and others, Citigroup still beat analysts’ expectations, in part due to higher gains in lending following US Federal Reserve rate hikes.
Chief Financial Officer Mark Mason told reporters that Citi’s credit card business was also performing “very, very strongly,” suggesting consumers remain on solid footing for now.
“There is still a lot of liquidity left with consumers,” he said at a media conference. “Obviously that allows for a little bit more flexibility than they would otherwise have.”
But continued spending is “difficult to reconcile” as data shows eroding consumer sentiment on inflation, Mason conceded.
Citi reported profit of $4.5 billion, down 27 percent from the same period last year on revenue of $19.6 billion and up 11 percent.
Citi had a net accumulated credit reserve of $375 million in the event of non-performing loans.
Mason said the company feels “reasonably dovish” in the event of a downturn but sees no “signs of immediate credit loss concerns.”
Increased volatility in financial markets boosted earnings from trading in equities, commodities and other financial markets, offsetting a decline in merger and acquisition activity.
Like JPMorgan, Citigroup is suspending its share buybacks in light of new US stress test requirements to hold more capital in case of a downturn.
Mason said the decision also reflected uncertainty about the macro economy.
“We are concerned about the prospect of a recession,” he said. “We are concerned about raising interest rates to somehow stabilize things as we navigate this environment and the uncertainty it brings.”
Wells Fargo also reported a fall in profits in the second quarter.
The California-based bank’s revenue was $3.1 billion, down 48 percent from the prior-year level on a 16 percent decline in revenue to $17.0 billion.
But investors were cheered by Wells’ forecast of a 20% increase in net interest income in 2022 from the prior-year level amid the Fed’s rate hikes.
Citigroup shares rose 9.7 percent to $48.40 in morning trade, while Wells Fargo was up 6.6 percent to $41.28.
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