Citigroup (NYSE: C) It posted $ 1.3 billion profit in the second quarter, a 73% drop from the second quarter of 2019 and 48% from the first quarter. Earnings per share fell 74% to $ 0.50. Despite the precipitous drop, the bank outperformed analyst estimates with higher-than-expected business income.
Overall, Citigroup generated $ 19.8 billion in revenue, an increase of 5% year-over-year. Revenue gains came primarily from the institutional client group, which increased 21% to $ 12.1 billion. Within that group, trading in the fixed income markets experienced a 68% increase in income to $ 5.6 billion. Additionally, investment banking revenues increased 37% to $ 1.7 billion.
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These gains were offset by declining revenue in global consumer banking, which fell 10% to $ 7.3 billion. Retail banking revenues decreased 11% to $ 2.8 billion, while the card business decreased 9% to $ 4.5 billion.
Earnings were affected by a huge increase in the credit loss reserve (ACL), reflecting the deterioration of the company’s macroeconomic outlook and declines in the corporate loan portfolio due to the economic impact of the COVID-19 pandemic. . Citigroup’s total cost of credit in the second quarter was $ 7.9 billion, compared to $ 2.1 billion in the second quarter of 2019 and $ 7 billion in the last quarter.
That includes a net ACL accumulation of $ 5.6 billion, compared to just $ 111 million year-over-year. But more relevant, the ACL has risen 15% since the first quarter. Reserve accumulation includes a qualitative management adjustment to reflect the potential for a “higher stress level” and a slower economic recovery.
CEO Michael Corbat said: “We entered this crisis from a position of strength. During the quarter, our regulatory capital increased and our CET1 index improved to 11.5%, comfortably above our new regulatory minimum of 10%.”
The bank’s efficiency ratio fell to 52.7% from 56% in the second quarter of 2019.
