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Citigroup: Lower Taxes, Share Buybacks Boost Q3 Earnings

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  • Citigroup posted better-than-expected third-quarter results.
  • The bank’s EPS beat analysts’ estimates due to lower taxes and share repurchases.

Citigroup (C) announced stronger-than-expected third-quarter results today. The bank’s revenues were slightly ahead of analysts’ expectations. Lower deposit spreads restricted the growth rate. However, growth in loans and deposits and growth in branded cards supported the bank’s top-line growth.

What boosted Citigroup’s earnings?

Despite low revenue growth, Citigroup’s third-quarter EPS beat analysts’ consensus estimate. Improved efficiency and share repurchases drove Citigroup’s third-quarter EPS, which has increased about 20% YoY (year-over-year). Lower taxes cushioned the company’s earnings.

In comparison, JPMorgan Chase (JPM) reported record third-quarter revenues, which beat analysts’ consensus estimate. The company’s EPS beat analysts’ estimate by a wide margin due to higher revenues and share buybacks.

Goldman Sachs (GS) reported a disappointing third-quarter EPS. The bank’s revenues beat analysts’ expectations. However, Goldman Sachs’s revenues continued to fall on a YoY basis. The company’s third-quarter EPS of $4.79 missed analysts’ estimate of $4.81 and fell about 24% YoY.

Citigroup’s third-quarter results

Citigroup posted revenues of $18.57 billion, which increased about 1% YoY and beat analysts’ estimate of $18.55 billion. The revenues in the Global Consumer Banking segment rose 4% YoY due to growth across all of the regions.

In the Global Consumer Banking segment, North America revenues rose 4% due to an increase in branded cards and organic loan growth. Branded cards’ revenues increased 11% due to growth in interest-earning balances. However, retail banking revenues fell 2%, which reflected lower deposit spreads. International consumer banking saw 4% revenue growth, which reflected 3% growth in Latin America led by cards and higher deposit spreads. Meanwhile, the revenues in Asia increased 5% due to higher deposits and investment revenues.

The revenues in the Institutional Clients Group segment increased 3%, which reflected growth in the Investment Banking, Treasury & Trade Solutions, and Private Bank segments. Average loans increased 5% on a constant-currency basis. Meanwhile, average deposits rose 11%.

Citigroup’s efficiency ratio improved by 20 basis points YoY to 56.3%. The effective tax rate was 18%—down from 24% in the third quarter of the previous year.

Citigroup posted an EPS of $2.07, which increased 20% YoY and beat analysts’ estimate of $1.95. The lower effective tax rate and a 10% decline in the outstanding share count drove Citigroup’s bottom line. Notably, the company’s third-quarter EPS includes a benefit of $0.10 per share from some discrete tax items.

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