Citigroup Inc shares surged over 10% on Friday after the third-largest U.S. bank posted a smaller-than-expected 27%; drop in quarterly profit on unusual strength in its treasury services business; and its trading desks cashed in on market volatility, cushioning a slump in investment banking.
The Treasury and Trade Solutions (TTS) business, Citi’s crown jewel; posted a 33% jump in revenue to $3 billion on the back of higher net interest income and fee growth; the best performance in a decade, the bank said.
Markets revenue, meanwhile, jumped by 25% to $5.3 billion; thanks to volatility in the commodities and foreign exchange markets, a strong segment for the bank. Investors and analysts hailed the quarter as a long-awaited sign that Chief Executive Officer Jane Fraser’s ambitious plan; to restructure the bank and bring its share price and profitability in line with peers was paying off.
The bank’s profit fell to $4.5 billion, or $2.19 a share; in the quarter ended June 30, from $6.2 billion, or $2.85 a share, a year earlier. Excluding items, Citi earned $2.30 per share, calculations, beating the average analyst estimate of $1.68 per share.
“Citigroup appears to be one highlight of the bank earnings season so far;” said David Wagner, a portfolio manager at Aptus Capital Advisors; adding that the treasury and trade solutions business was “firing on all cylinders, insulating all the losses from the investment banking segment.” “Signs of growth for card balances and fee growth; and personal banking and wealth management; will be key metrics we will be watching as expected pressure within investment banking plays out,” wrote David Sekera, U.S. market strategist.