Citigroup’s profit rises due to strong performance in various areas, despite losses from the sale in Mexico

Citigroup Reports Strong Third Quarter Earnings

On October 14, Citigroup announced that its third-quarter profits exceeded expectations, indicating robust performance across its divisions. Even with a $726 million loss due to the sale of shares in its Mexican subsidiary, profits rose significantly.

Like many of its peers, Citibank experienced a boost from a rebound in trade, as companies engaged in substantial deals amidst uncertainty regarding President Donald Trump’s tariff policies. Interestingly, the banking sector saw a remarkable revenue increase of 34% compared to the previous year.

Jane Fraser, Citi’s CEO, noted in a statement that the recent restructuring has positioned Citi more competitively. Following the announcement, Citigroup’s stock rose by 1.3%.

Despite the loss on the Banamex sale, Citi’s earnings were impressive. Excluding this setback, the adjusted earnings per share came in at $2.24, surpassing analysts’ expectations of $1.90.

Market revenue for the quarter climbed 15%, reaching $5.6 billion, driven by strong performances in both stocks and fixed income. The recent interest rate cut in September and anticipation of further easing scenarios could stimulate economic activity and increase borrower demand.

Mark Mason, Citigroup’s CFO, mentioned that the high valuations in the stock market suggest that some sectors may be “frothy and overvalued.”

Credit Cost

Notably, delinquencies on corporate loans more than doubled from the previous year, totaling $2.1 billion. Mason indicated that this increase relates to two specific customer downgrades. However, he reassured that the bank is not facing significant issues, even in light of recent bankruptcies in the auto parts sector.

Citi’s return on tangible common equity—an indicator of how effectively the company is utilizing its capital—was recorded at 8% for the quarter, with a year-to-date figure of 8.6%. Excluding one-time losses, the ROTCE was nearly 9.7%, which is approaching the target of 10-11% set by Fraser for the upcoming year.

Mason expressed optimism about potential reductions in minimum capital requirements, contingent upon the completion of the Basel III endgame and other regulatory changes.

In comparison, banks like JPMorgan Chase and Wells Fargo have reported their own third-quarter earnings recently, capitalizing on the strong environment in investment banking.

Interestingly, Citibank’s stock has surged by 36.5% so far this year, trailing JPMorgan’s 28.5% and outpacing Wells Fargo’s 12.4%. It seems Citi is on the path to recovery, rekindling investor confidence as its stock trades at a lower price relative to book value compared to its competitors.

Mexico Sale

In another development, Citi announced plans to sell a 25% stake in its retail operation, Banamex, to Mexican billionaire Fernando Chico Pardo for approximately $2.3 billion. The bank intends to make its Mexican operations public to divest its remaining stake, following a rejection of an unsolicited offer from Grupo Mexico just last week.