Reduced revenues, a surge in expenses, and higher credit costs have been cited as reasons for the drop in net income
A Citigroup office in Toronto. (Credit: Raysonho @ Open Grid Scheduler / Grid Engine/Wikipedia.org)
Citigroup has reported a 34% drop in its net income for the third quarter 2020 (Q3 2020) to $3.23bn, or $1.4 per diluted share, compared to $4.91bn, or $2.07 per diluted share, respectively, in the same period last year.
The US investment bank attributed the decrease in net income mainly to the reduced revenues, a surge in expenses, and also higher credit costs. These included a civil money penalty of $400m associated with consent orders recorded in the corporate/other business unit.
In the second quarter of 2020, the US investment bank’s net income was $1.31bn, or $0.5 per diluted share.
Citigroup Q3 2020 revenues
The bank’s revenues in Q3 2020 were down by 7% to $17.3bn compared to $18.57bn in the prior-year period.
Citigroup said that the drop in revenues mainly reflected lower revenues in global consumer banking (GCB) and corporate/other units. These were offset slightly by growth across the fixed income markets, investment banking, equity markets, and the private bank in the institutional clients group (ICG), said the bank.
Citigroup’s global consumer banking unit reported revenues of $7.17bn in Q3 2020, which was 13% less than the $8.28bn reported in the same quarter in the previous year.
The bank’s institutional clients group business saw a 5% growth in revenues in Q3 2020 at $10.35bn compared to $9.85bn reported in Q3 2019.
The bank’s operating expenses in Q3 2020 were up by 5% compared to Q3 2019 at $11bn. The bank said that this was due to the civil money penalty, higher compensation, Covid-19 related expenses, and also investments across infrastructure, risk management, and controls.
The investment bank’s end-of-period loans were $667bn as of the end of the third quarter, which is 4% lesser than the prior-year period. On the other hand, the bank’s end-of-period deposits were $1.3 trillion as of the end of Q3 2020, which is an increase of 16% compared to Q3 2019.
Citigroup CEO Michael Corbat said: “We continue to navigate the effects of the COVID-19 pandemic extremely well. Credit costs have stabilized; deposits continued to increase; and revenues are up 3% year-to-date.
“Our Institutional Clients Group again had very strong performance, especially in Markets, Investment Banking and the Private Bank. The backbone of our global network, Treasury and Trade Solutions experienced strong client engagement in the face of low interest rates.
“Although Global Consumer Banking revenues remained lower as a result of the pandemic, we did see higher activity in our mortgage and wealth management products.”