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Citigroup’s 3Q15 Earnings Top Expectations

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Earnings beat estimates

Citigroup reported its third-quarter earnings on October 15, 2015. Citigroup is among the few banks to deliver extraordinary quarterly results in an otherwise dull earnings season.

Five of the largest US banks (VFH)—J.P. Morgan (JPM), Wells Fargo (WFC), Bank of America (BAC), Citigroup (C), and Goldman Sachs (GS)—reported their earnings during the week. Bank earnings have been lackluster, weighed down by an industry-wide drop in trading revenues and low interest rates.

Citigroup announced strong profits for the quarter, topping analysts’ expectations. Investors responded positively to the results, sending Citigroup’s shares soaring 4.5% on October 15.

The company reported EPS (earnings per share) of $1.35, beating consensus estimates of $1.28 and up from the $0.95 reported during the same period last year. Excluding the effects of credit valuation adjustments, EPS came in at $1.31.

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Revenues came in at $18.7 billion—5% lower than in 3Q14. However, net income rose by a whopping 51% YoY (year-over-year) due to a sharp decline in expenses. Excluding credit valuation adjustment, or CVA, net income was higher by 36% at $4.2 billion due to lower operating expenses, credit losses, and taxes. However, lower revenues and loan loss reserve releases were a drag on Citigroup’s earnings.

Operating expenses fell 18% YoY at $13.6 billion, primarily driven by lower legal expenses.

Company overview

Citigroup is a financial holding company incorporated in 1988 with a market capitalization of $160 billion as of October 15.

Its businesses provide consumers, corporations, governments, and institutions with financial products and services. The company operates through two primary business segments: Citicorp, consisting of Citi’s Global Consumer Banking businesses and Institutional Clients Group, and Citi Holdings, consisting of businesses and portfolios of assets that Citi has determined are not central to its core Citicorp businesses.

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