Citigroup Announces Revenue Decline but Earnings Growth in Q1 2019

Sharp slowdown in equity trading caused revenue to drop 2%. However, earnings increased 11% due to cost reduction and other factors.

US multinational investment bank and financial services corporation, Citigroup recently announced its earnings for the first quarter of 2019. It reported a revenue decline as well as higher-than-expected earnings, which show the company had a mixed first quarter this year. Expanded net-interest margin, expense control, growth in the investment banking domain, and cost reduction helped the bank to achieve earnings that beat the expectations of analysts. Another factor based on which the bank showed improvement is lower tax rate. However, analysts say the bank may find it difficult to repeat the use of the same ways through which it improved its results in the first quarter of 2019.

“Our earnings show the advancement Citigroup is making for improving its return of and return on capital. Citigroup stays committed to implementing its strategy and continuing to steadily progress toward its financial targets,” said Michael Corbat, CEO of Citigroup (source).

Q1 2019 Results versus Analyst Expectations

Citigroup surpassed investment banking revenue expectation of $1.2 Bn by reporting $1.3 Bn. Equities trading, however, showed sharp decline from analyst forecast of $930 Mn to $842 Mn reported  by the bank. For fixed-income, currencies, and commodities trading revenue, analysts had expected $3.05 Bn. The bank reported a higher figure, i.e. $3.45 Bn. Revenue reached $18.58 Bn, falling short of $18.63 Bn expected by analysts. Earnings jumped to $1.87 per share from the expectation of $1.80 per share.

Share buybacks helped to increase earnings in the first quarter of 2019, a representative for Citigroup said. In the same quarter, approximately $4.06 Bn was repurchased by the bank in shares. Through common-stock dividends, around $1.08 Bn was returned to shareholders. During last year’s fourth quarter, the bank’s net interest margin was 2.71%. As reported by the bank, the margin increased to 2.72% in the first quarter of 2019. The bank also reported more-than-expected growth in deposits and loans. However, a substantial drop in equity trading caused overall revenue to fall by 2%. Nevertheless, the bank’s cost-cutting efforts boosted its earnings by 11% on a Y-o-Y basis.

“Citigroup is expecting to return to Y-o-Y revenue growth, looking to the second quarter. It is not expecting to see the same magnitude of seasonal revenues decline that we see typically from Q1 to Q2,” said Mark Mason, CFO of Citigroup.

In the first quarter of 2019, there was a 24% decrease in equity trading. Citigroup announced that the decrease was a reflection of lower market volumes and client financing balances. Moreover, the decrease was slightly offset by an increase of almost 20% in investment banking revenue.