Citi's Second Quarter 2023 Earnings
Citi's Second Quarter 2023 Earnings Review Summary:
Overview
The global economy remains resilient, although the macro backdrop varies across key markets.
Central banks are responding to inflation, indicating the cycle of interest rate hikes is not over.The US labour market remains tight, pushing the timing of a potential recession later into 2023 or even 2024.
Robust demand for services acts as a backstop for the economy.
Eurozone and China
The Eurozone has exceeded expectations, but countries face challenges from labour and energy costs, impacting the region's long-term competitiveness.
China's growth has decelerated after an initial post-reopening surge, disappointing expectations of being a strong driver of global growth.
Financials and business
Citi's diversified business model and strong balance sheet help navigate challenging macroeconomic conditions.
Net income for the quarter was $2.9 billion, with an EPS of $1.33. Revenues, excluding divestitures, were relatively flat compared to the previous year.
Cost-saving measures are being pursued to offset significant investments in the bank's transformation.
Treasury and Trade Solutions (TTS) and security services have shown strong performance with revenues up 15% driven by fee-generating mandates and new client relationships.
Markets revenues were down 13% due to low volatility and clients standing on the sidelines during the debt ceiling situation. However, corporate client flows remained strong.
Investment banking revenues were disappointing, down 24% due to heightened macro uncertainty impacting client activity.
Citi's cards businesses experienced double-digit revenue growth, driven by customer engagement and the normalization of payment rates. Wealth revenues were down 5% due to the deposit mix shift and lower investment revenues.
Expenses were elevated, including additional repositioning actions, but the bank remains committed to bending the expense curve by the end of 2024.
Forward guidance
Citi aims to close the sales of its remaining two Asia consumer franchises and restart the exit process in Poland to simplify its operations.
Capital allocation and utilization, as well as management buffers, will be considered to reduce capital ratios.
Citi ended the quarter with a CET1 ratio of 13.3% and a tangible book value per share of $85.34.
The bank is engaging in dialogue with regulators to better understand differences in capital requirements and implementation timing.
Despite challenges, Citi remains focused on executing its strategy and achieving its medium-term return on tangible common equity (ROTCE) target.
The Institutional Clients Group reported a 9% decline in revenues, while Personal Banking and Wealth Management revenues increased by 6%.
Citi maintains its full-year revenue guidance of $78 billion to $79 billion, with an increased net interest income guidance. Expense guidance remains around $54 billion.
The bank expects net credit losses in cards to continue normalizing and a tax rate of approximately 25% for the full year.
Citi continues to simplify its operations, improve revenue mix, and work toward reducing expenses and capital over time.
Anne Chapman
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