Strong Q3 earning for Citigroup (NYSE:C)


Citigroup (NYSE:C) topped analyst predictions for its third quarter earnings on October 14. This was due to the improvement in the company’s net interest margin, increase in equity and debt trading revenues and low provision costs.

The company’s institutional clients division as well as its global consumer banking division made very strong profits. Its Citi Holdings also reported a quarterly profit for the first time ever since its non-core division began in the economic crisis of 2008.

Revenues for Citigroup (NYSE:C) increased by about 10% compared to the company’s previous year revenues which were around 3%. Being one of the biggest banks the country has seen, Citigroup (NYSE:C)  grew further by strengthening its very own Basel III Core Tier 1 Capital Ratio which brought the figure to around 10.7% with 30 basis points.

The bank also plans to reduce its investments which aren’t making much money as it is working on its exit plans to stop operating in 11 countries that aren’t very profitable to the company. These factors helped the bank in gaining 3% shares on Tuesday trading.

Citigroup’s (NYSE:C) basic strength is the global presence that it has created with many outlets across various countries. The company is also a leader in the financial services offered to the public with ranging platforms from traditional loan deposits to investment banking offerings. The bank is highly diversified in the activities it carries out which helps it gain revenue from various streams.

The company has access to cheap funds which include low interest rates from regions that it operates in which in turn gives it better margins of net interest. The bank has been trying to reduce its operating costs for a while know and these efforts are improving. Citigroup’s (NYSE:C) efficiency ratio is 54.8% for its consumer banking division in the third quarter of 2014. This was the company’s best performance since the second quarter of 2013.

The company aims to improve its profit margins in the years to come by getting rid of its banking units in Czech Republic, Panama and Peru,  Egypt, Costa Rica, Nicaragua, El Salvador, Guam, Guatemala, Japan and Hungary as well as the consumer finance business of the company in Korea. The operations in these countries make lesser than about 5% in the consumer banking revenues of the company which means that they aren’t very profitable.

The trading operations of Citigroup (NYSE:C) make about 20-25% of the total revenues of the bank with 40% of the total earnings in the period. The revenues of Citigroup (NYSE:C) are reported as part of the Institutional Clients Group division.

The bank made $3.7 billion in the third quarter of 2014 in trading revenues. The debt trading was responsible in over 80% of the total figure. This makes it a 2% improvement for Citigroup (NYSE:C) in a quarter by quarter basis and a 7% improvement on a year by year basis. Equity trading revenues for the company increased at a quicker pace compared to debt trading revenues.