Citigroup profits jump as lower costs compensate for revenue decline
US banks are cutting costs to boost earnings
Citi’s Irish headquarters in Dublin’s Docklands Photograph: Alan Betson/The Irish Times
Citigroup, the third biggest US bank by assets and an employer of thousands in Ireland, reported a 51 per cent jump in quarterly profit as lower costs more than made up for a fall in revenue amid increased market volatility and uncertainty about the timing of a US interest rate hike.
Citi’s legal and related costs plunged to $376 million (€330m) in the third quarter from $1.6 billion a year earlier, with the lender, under chief executive Michael Corbat, putting most of the problems stemming from the financial crisis behind it.
Operating expenses fell 18 per cent as the bank exited businesses where profits and prospects were not worthwhile.
US banks including Citi, JPMorgan Chase and Bank of America are cutting costs to boost earnings as overnight fund rates stay near zero and fixed-income trading, long a source of revenue growth, shows no sign of picking up.
Citi shares rose as much as 2.5 per cent in morning trading on Thursday.
Revenue fell in two of the bank’s three units. However, the revenue decline in Citicorp, its largest unit that holds core businesses, was the smallest at 2 percent.
Citi Holdings, “the bad bank” that holds Citi’s assets marked for sale, saw the biggest plunge in revenue, a steep 32 per cent, as assets in the unit shrank 20 per cent.