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Published: Sat, July 16, 2016
Economy | By Melissa Porter

Citigroup's profit falls 17 percent, still beats forecasts

Citigroup's profit falls 17 percent, still beats forecasts

Profit at the consumer bank fell 18%, with the biggest drop in income from continuing operations of 22% from a year earlier coming in North America.

Citigroup Inc (NYSE:C) recently announced the results for the three-month period ended June 30, revealing a beat to the analysts estimates on earnings, spurring a rally in the stock.

The extremely low interest rates still putt pressure bank earnings.

Analysts expected Citigroup to report earnings of about $1.10 a share on $17.469 billion in revenue, a consensus estimate from Thomson Reuters stated, according to an article by Jon Marino for CNBC. Still, it was the second consecutive quarter with a year-over-year decline. The results still beat analysts' forecasts.

Citigroup's second-quarter net income dropped to US$4 billion, or US$1.24 a share, from US$4.85 billion, or US$1.51, a year earlier, the company said Friday in a statement.

Citigroup Inc reported a 14 per cent fall in quarterly profit, much smaller than the 25 per cent drop Chief Executive Michael Corbat had warned of early in June.

Revenue for the quarter also fell 8 percent to $17.5 billion, slightly beat analysts' estimates of $17.47 billion. The 21% jump in equity-trading revenue to $788 million surpassed their $707 million estimate. Investment-banking revenues fell 6 percent to $1.2 billion in the quarter, advisory revenues were down 7 percent and underwriting revenue for stock plunged 41 percent in the quarter. Now, Citigroup has to show that it can turn in steady earnings and boost revenue to improve returns for beleaguered shareholders. The EPS estimate for the 2016 fiscal year is $4.50 on revenues of $69.91 billion.

The bank, which gets more revenue from outside its home market than any of its USA peers, felt some pain from the dollar's strength during the period. Net income fell year over year as a result of lower revenues and a higher effective tax rate, partially offset by lower cost of credit and lower operating expenses. This was down from $19.16 billion past year. The handover wasn't without bumps.

The most global of the large United States banks, Citi's overseas consumer banking business held up well, with a 7 per cent increase in net profit, adjusted for changes in exchange rates. As Citigroup issued new cards and moved accounts to its system in June, shoppers took to the retailer's Facebook page with hundreds of complaints about the bank's customer service, saying they endured lengthy wait times and had trouble activating accounts. The shares trade at roughly 70 percent of tangible book value, meaning investors think its assets are worth less than their carrying value. It's become such a diminished part of the firm's results that Citigroup will stop separately breaking them out later this year.

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