Emerging markets bolster Citigroup result
Citigroup, the US's third-largest bank by assets, reported a profit of $US4.18 billion ($4.56 billion), compared with $US2.95 billion a year earlier. Revenue rose 11 per cent to $US20.48 billion.
"Our businesses performed well during the quarter and these results are well balanced through our products and geographies, especially in the emerging markets, where growth is being challenged," CEO Michael Corbat said.
Under his leadership, the bank hopes for growth to emerging markets, especially in Asia and Latin America. Citigroup is working to whittle down extraneous businesses that do not conform with its global operations, where its securities and lending operations dwarf those of many of its US rivals.
More than 50 per cent of Citigroup's revenue now comes from outside North America. Despite concerns about less-than-stellar growth in emerging markets, profit within Citigroup's international consumer banking business grew by 4 per cent to $US826 million. Revenue rose 5 per cent to $US4.7 billion.
Still, Citigroup's emerging markets business does not entirely inoculate the bank from broader challenges facing the US industry. On Friday, JPMorgan Chase and Wells Fargo reported falls in mortgage banking revenue, eroded by a lull in mortgage refinancing. A sharp rise in interest rates has caused the refinancing boom to sputter.
Frequently Asked Questions about this Article…
Citigroup reported stronger-than-expected Q2 results: net income surged 42% to US$4.18 billion (from US$2.95 billion a year earlier) and revenue rose 11% to US$20.48 billion, helping the bank beat street expectations.
More than 50% of Citigroup's revenue now comes from outside North America, reflecting the bank's large international footprint.
Citigroup's international consumer banking profit grew about 4% to US$826 million, while revenue in that division rose roughly 5% to US$4.7 billion.
Citigroup's emerging markets business helped bolster the quarter: management said results were well balanced across products and geographies, with growth focus in emerging markets even though growth there is being challenged.
Under CEO Michael Corbat, Citigroup is focusing growth on emerging markets (particularly Asia and Latin America) and trimming extraneous businesses that don't align with its global operations to concentrate on its core securities and lending strengths.
Not entirely. While Citigroup's international and emerging markets strength helped results, the bank still faces broader US industry challenges—such as weak mortgage banking revenue suffered by peers—so international gains don't fully inoculate it from those headwinds.
A sharp rise in interest rates has cooled mortgage refinancing activity, causing banks like JPMorgan Chase and Wells Fargo to report falls in mortgage banking revenue. For investors, this highlights that higher rates can hurt mortgage-related earnings even if other divisions (like international banking) remain strong.
Investors should monitor Citigroup's emerging markets growth (especially in Asia and Latin America), progress trimming non-core businesses, international consumer banking profit and revenue trends, and signs of mortgage banking pressure from changes in interest rates.
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