Citigroup (C.US) reforms bear fruit! Most of its five businesses are strong, and its trading business hits a decade high

Before the opening of the U.S. stock market on Tuesday, Citigroup (C.US) reported its third-quarter earnings. The data showed that Citigroup's Q3 revenue was US$20.32 billion, up 0.9% YoY, topping market expectations; its net profit was US$3.2 billion, down 9% YoY; and its EPS was US$1.51, far exceeding market expectations.

Citigroup's trading business benefited from the surge in volatility of various assets in recent months, achieving its best performance in at least a decade in Q3.

The bank's market division recorded a 1% YoY rise in Q3 revenue to US$4.82 billion, an unexpected growth. Just a few weeks ago, the company had warned investors that it expected a decline in market revenue. Stock trading revenue surged 32% to drive the business.

Citigroup's net interest income in Q3 was US$13.4 billion, lower than US$13.5 billion in Q2 and US$13.8 billion in Q3 last year.

The bank also recorded US$2.7 billion in provisions this quarter, due to increased losses in its credit card business. Although the surge in credit card delinquencies dragged down the quarter's profits, Citigroup's other four major businesses, services, banking, wealth, and U.S. consumer banking, also saw revenue growth YoY.

Within the banking division, Citigroup's revenue grew 16% to US$1.6 billion, with investment banking fees up 44%. The bank's massive service business revenue rose 8% to US$5 billion, while the U.S. consumer banking division's revenue grew 3% to US$5 billion. The bank's wealth business revenue soared 9% to US$2 billion,

These results are key victories for CEO Jane Fraser and her bank transformation. She has carried out a comprehensive restructuring of the bank, cutting 20,000 jobs and bringing in new senior management from competitors.

Fraser said in a statement: "In a pivotal year, this quarter contained multiple evidence that we are moving in the right direction and our strategy is gaining traction."

Performance Guidance

Citigroup expects to achieve its full-year revenue and expense targets thanks to lower expenses.

Its full-year net interest income (excluding market) is expected to decline "slightly" YoY, compared with the previous expectation of "slightly lower." The company said that its net interest income (excluding market) in Q4 is expected to be roughly flat with Q3's US$13.4 billion.

The bank reiterated its full-year revenue of approximately US$80 billion to US$81 billion, while the consensus is US$80.4 billion.