Citigroup profit beats estimates on higher interest income from loans

Citigroup Inc's first-quarter profit beat Wall Street expectations on Friday as it earned more from borrowers paying higher interest on loans, benefiting from a tighter monetary policy by the Federal Reserve.

However, it set aside $241 million in the quarter to cover potential loan losses against the backdrop of a slowing economy and compared to a reserve release of $138 million a year ago.

The banking sector was jolted by the collapse of Silicon Valley Bank and Signature Bank last month, which wiped out billions of dollars in market value. In Europe, Credit Suisse was rescued by rival UBS Group AG in a government-backed takeover.

Also Read | UBS considers retaining Credit Suisse's India unit

The lender's deposit growth was flat at $1.33 trillion from a quarter as well as a year ago as investors moved their cash into money market funds to chase greater yields.

Its loans also fell marginally to $652 billion, while its net interest income rose 23 per cent to $13.3 billion.

Analysts expect an economic slowdown to curb demand for loans and depress net interest margins (NIM) across the industry in the coming quarters.

Citi's NIM could be the worst hit due to its high deposit betas, the difference in interest rates banks pass on to consumers, Moody's said in February. That could derail its plan to better rival peers in profitability.

Also Read | HDFC Bank to raise Rs 50,000 crore via bonds in a year

Under Chief Executive Jane Fraser, the bank has been simplifying its businesses in an effort to boost revenue and become more competitive with rivals.

Citi earned $1.86 per share in the first quarter, beating analysts' average estimate of $1.67, according to Refinitiv data.

Net income rose 7 per cent to $4.6 billion, or $2.19 per share, in the three months to March 31 from $4.3 billion, or $2.02, a year earlier.

Citi's investment banking revenue sank 25 per cent from $774 million a year ago, weighed down by the most sluggish market for deals in more than a decade.

It slipped four rungs to the ninth position in 2023 in the list of financial advisors based on deal value, according to data from Dealogic.