November 30, 2023

Investment Banking

Let Your Investment Banking Do The Walking

Citigroup profit holds steady as investment banking fees jump

NEW YORK, Oct 13 (Reuters) – Citigroup’s (C.N) profit was broadly steady in the third quarter as it benefited from rising interest payments and surging investment banking fees, sending its shares up 3% in premarket trading on Friday.

The bank said its recently announced reorganization plan will result in a 15% reduction in functional roles and that the first phase of the plan eliminated 60 net committees.

The bank’s net income rose 2% to $3.5 billion from a year ago, it reported, while earnings per share remained stable at $1.63, exceeding the consensus estimate of $1.21 by analysts polled by LSEG.

“We announced consequential changes that align our organizational structure with our strategy and changes how we run the bank,” CEO Jane Fraser said in a statement.

“When completed, we will have a simpler firm that can operate faster, better serve our clients and unlock value.”

Revenue at Citi’s institutional clients group that houses its Wall Street operations rose 12% from a year ago, fueled by a 34% jump in investment banking fees. The gains were a bright spot after several quarters of depressed dealmaking.

The bank’s trading unit also boosted revenue, while its division providing treasury and securities services to corporations brought in 12% more revenue.

Citi’s overall revenue climbed 9% to $20.1 billion.

The third largest U.S. lender set aside more money to cover potential bad loans, even though delinquency levels were still low compared to historical levels.

At Citi, the total provision for the credit portfolio rose to $17.6 billion from $16.3 billion a year ago.

At the same time, lenders have benefited from the Federal Reserve’s campaign to quell inflation, which has increased borrowing costs and helped banks earn more from customer interest payments.

Fraser announced a sweeping reorganization last month that will disband ICG and give her more direct oversight over the company’s businesses. The new structure is not yet reflected in the third-quarter results.

Expenses rose 6% to $13.5 billion due to rising costs and investments in control systems. The expenses included severance payments for employees who were laid off during the sale of its international businesses.

Citi has not yet announced the expected headcount reduction and expected savings with the reorganization that will reduce management layers and prompt layoffs across its businesses.

Fraser has said there was “no room for bystanders” as the bank embarked on its biggest overhaul in almost two decades. The changes are being rolled out at a time of economic uncertainty that has weighed on some of Citi’s key businesses like trading.

Rivals Wells Fargo (WFC.N) and JPMorgan Chase (JPM.N) also reported higher quarterly profits on Friday, boosted by a rise interest payments.

Reporting by Manya Saini in Bengaluru and Tatiana Bautzer in New York; Editing by Lananh Nguyen and Arun Koyyur

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