Citi profit falls 73% as bank sets aside $7.9B over loan concerns

Dive Brief:

Citi’s second-quarter profits fell 73% but were buoyed by a 68% jump in fixed-income trading, the bank reported Tuesday. The swell in trading marked a familiar pattern for the nation’s third-largest bank, which reported a 49% increase in the category during last year’s fourth quarter and a 39% bump in this year’s first to give the segment its best quarterly result in eight years.
The bank set aside $7.9 billion in the quarter for loan losses. That breaks down to $5.6 billion added to the bank’s reserves and $2.3 billion in net write-offs. The figure outpaces the $4.9 billion the bank reserved during the first quarter.
Credit card spending, however, suffered a 24% drop as the pandemic kept consumers home and saving money. It marked a continued decline — the bank saw a 30% decrease in card spending in the last week of March — in a usually reliable business segment for the world’s largest card issuer. Card balances slumped 7.4%.

Dive Insight:

Although the coronavirus’s effects started to be reflected in banks’ first-quarter earnings, the damage was limited to the last couple of weeks. Until now, it was unclear how a full quarter of pandemic-influenced business would affect earnings.

"While credit costs weighed down our net income, our overall business performance was strong during the quarter, and we have been able to navigate the COVID-19 pandemic reasonably well," Citi CEO Michael Corbat said Tuesday in a statement accompanying the bank’s earnings report.

The bank posted a second-quarter profit of $1.32 billion, down from $4.8 billion a year earlier.

More granular benchmarks were hit or miss. Overall revenue jumped 5% to $19.77 billion. But revenue in the bank’s consumer segment fell 10% to $7.34 billion while rising 21% to $12.14 billion in Citi’s corporate and investment bank.

The bank said it provided relief to 2 million card balances in the form of waived fees or extended deadlines. Costs for the bank fell 1% to $10.4 billion.

"We continued to add to our substantial levels of liquidity, and our balance sheet has plenty of capacity to serve our clients," Corbat said. "With a sharp emphasis on risk management, we are prepared for a variety of scenarios and will continue to operate our institution prudently given this unprecedented situation."