Citigroup stock surges as collapsing investment banking fees cloud third-quarter earnings pace

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Updated at 11:26 a.m. EST

Citigroup (VS) – Get a free report released better-than-expected third-quarter results on Friday, but a sharp drop in investment banking revenue, along with higher operating expenses, clouded an otherwise strong earnings update.

Citigroup said earnings for the three months ending September were pegged at $3.5 billion, or $1.63 per share, down 24.1% from the same period last year. but well ahead of Street’s consensus forecast of $1.42 per share. The group’s revenue, Citigroup said, rose 7.6% to $18.5 billion, just ahead of analysts’ estimates of a total of $18.26 billion.

Revenue from treasury and commerce solutions, its global business, rose 40% to $3.2 billion, while the group’s overall operating expenses rose 8% to $12.7 billion. dollars.

Investment banking revenue was down 64% from a year ago, the bank said, in part due to the broader decline in global transactions. Merger activity, in fact, is down about 55% from last year’s levels, according to data from Refinitiv, with just $692 billion in closed deals. This is the lowest total since the second quarter of 2020 and the largest year-over-year decline since 2009.

“The banking sector has been the business most affected by the macroeconomic environment with reduced deal flow and less appetite for mergers and acquisitions,” CEO Jane Fraser said. “While the wealth management environment has been challenging, our revenues have grown outside of Asia. US retail banking further strengthened its double-digit growth trajectory revenue growth in our two card businesses.”

“Given the strength of our balance sheetcapital levels and liquiditywe are well positioned to help our clients navigate very challenging markets and slower growth,” she added.

Citigroup shares rose 2.8% in early Friday trading after the earnings release to change hands at $44.14 apiece.

Earlier on Friday, Citigroup’s big rival, JPMorgan (JPM) – Get a free reportset aside more than $800 million to cover potentially bad loans in a declining national economy but offset the decline in transaction activity with a 33% increase in net interest income.

JPMorgan said earnings for the three months ending September were pegged at $3.32 per share, down 11.2% from the same period last year but firmly ahead of the forecast. Street consensus of $2.89 per share.

Managed revenue, JPMorgan said, rose 7.5% to $32.7 billion, just ahead of analyst estimates of a total of $32.03 billion.

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