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Citigroup's third-quarter revenues rose 1% from a year ago while its expenses fell 2%, but that wasn't enough to offset the impact that the higher cost of credit had on the firm's net income.
For the three-month period ended Sept. 30, Citi reported net income of $3.2 billion, down 9% from the third quarter of 2023. Earnings per share were $1.51, topping S&P analysts' expectations of $1.31 but down from $1.63 in the year-ago period.
Revenues were $20.3 billion for the three-month period. A year ago, revenues were $20.1 billion.
Citi's cost of credit rose 45% from a year ago to $2.7 billion and was mainly driven by larger net credit losses in cards as well as a higher credit reserve build, totaling $315 million, to account for loan growth and mix, the New York City-based company said Tuesday in a press release.
The news comes after JPMorgan Chase reported a steep year-over-year increase in credit costs in the third quarter, as the bank sought to cover a surge in net charge-offs and added $1 billion in loan-loss reserves.
CEO Jane Fraser, who is leading Citi through a business simplification plan as well as a multiyear risk management overhaul program, seemed upbeat about the third-quarter results.
"In a pivotal year, this quarter contains multiple proof points that we are moving in the right direction and that our strategy is gaining traction, including positive operating leverage for each of our businesses, share gains and fee growth," Fraser said in the release.
For the quarter, each of Citi's five businesses — markets, banking, wealth, U.S. personal banking and services — reported a year-over-year uptick in revenues. The banking business, which includes business and investment banking, led the pack with a 16% increase in revenues, primarily driven by investment banking, where revenues rose 31% from the year-ago quarter.
Meanwhile, U.S. personal banking's revenues rose 3% year over year, but the segment's net income declined by 31%. The decline was tied to the higher cost of credit, the company said.
Citi maintained its revenue and expense projections for the full year, reiterating that it is on track to realize total revenues of $80 billion to $81 billion and total expenses of $53.5 billion to $53.8 billion, though it noted in the release that expenses will likely wind up at the higher end of that range.
Part of Citi's simplification plan includes selling or winding down certain retail franchises overseas. Citigroup said Tuesday that it is on track to separate the two banks in Mexico in the fourth quarter, and wind-downs in South Korea, China and Russia are ahead of schedule.
On the regulatory front, it was a mixed quarter for the $2.4 trillion-asset company. In early July, it received an additional $136 million in fines issued by the Federal Reserve and the Office of the Comptroller of the Currency, which said that while Citi is making some progress on its risk management overhaul, it is not moving quickly enough in the area of data management.
Then, in early October, the Fed said it had lifted an 11-year-old enforcement order related to certain deficiencies in Citi's Bank Secrecy Act and anti-money-laundering compliance programs. That marked the third enforcement against Citi to be lifted in the last two years.
