Citigroup shares fall after bank reports 25% decline in third-quarter profits

Citigroup reported stronger than expected revenue for the third quarter, but net income declined year over year.

The bank reported $18.51 billion in revenue versus the $18.25 billion expected by analysts, according to Refinitiv. This was up 6% year over year.

Net income fell 25% year over year. Citi reported $1.63 in earnings per share, but it is unclear if that is comparable to estimates.

The decline in profit came in part from an increase in loan loss reserves. Citigroup grew its allowance for credit losses by $370 million during the quarter, compared to a release of more than $1 billion in the same period last year.

Shares of the bank dipped 1.2% in premarket trading.

On the trading front, Citigroup reported $3.06 billion in fixed income revenue and $1.01 billion in equities revenue. Analysts were expecting revenue of $3.19 billion and $965 million, respectively, according to StreetAccount.

Bank stocks have been hammered this year over concerns that the U.S. is facing a recession, which would lead to a surge in loan losses. Citigroup shares have slumped 29% this year, leaving it by far the lowest-valued among its U.S. peers.

The potential for a global economic slowdown as central banks around the world battle inflation could hamper Jane Fraser’s turnaround efforts at Citigroup.

How will Fraser, who took over at the New York-based bank last year, begin to improve the company? Fraser has announced plans to exit retail banking markets outside the U.S. and set medium term return targets in March.

Even after its restructuring, Citigroup has more overseas operations than its rivals, leaving it more exposed to slowing economies as the impact of a surging U.S. dollar ripples around the world.   

Like the rest of the industry, Citigroup is also contending with a sharp decline in investment banking revenue, partly offset by an expected boost to trading results in the quarter.

JPMorgan and Wells Fargo beat revenue estimates for the third quarter. Morgan Stanley is also scheduled to report results Friday, followed by Bank of America on Monday and Goldman Sachs on Tuesday.

This story is developing. Please check back for updates.