Citi Beats on EPS, Boosts Credit Quality

Citigroup (NYSE: C) shares rose in premarket trading after the third-largest U.S. bank reported earnings that beat analyst expectations and improved its credit quality.

The company reported second-quarter earnings ex-items of $1 a share, down slightly from the same period a year earlier. That beat analyst expectations of 89 cents a share on the same basis, with help from a lower-than-expected tax rate.

“Our core business performed well in a difficult environment and are generating solid returns,” said CEO Vikram Pandit in a statement. “We had strong growth in both loans and deposits, showed resilience in our markets-facing businesses, and saw record revenues in transaction services."

Including an asset sale and accounting adjustments, the company earned $2.9 billion, or 95 cents a share, down from $3.34 billion, or $1.09 a year earlier.

Revenue fell to $18.64 billion from $20.62 billion a year earlier, coming in just short of analyst expectations of $18.76 billion. The decline in revenues year-over-year was driven by the ongoing wind down of Citi Holdings, which reduced revenues from Citi Holdings by 62% versus the prior year period. Citicorp revenues were essentially unchanged.

Credit quality improved. Net credit losses declined $736 million, or 25% to $2.2 billion, offsetting a 49% reduction in loan loss reserve releases to $715 million. Consumer loans more 90 days or more past due fell 17% to $3.1 billion.

The company's consumer banking unit boosted its loan loss reserve by $86 million.

As expected, light market volumes caused the company's trading revenue to fall 9% to $3.37 billion.

Total loan loss allowance was 4.3% of total loans, down from 5.4% in the prior year period.

The company ended the period with an estimated Basel III Tier One common capital ratio of 7.9%.