Citigroup Inc Beats Estimates; Announces DOJ Settlement

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Citigroup Inc (NYSE:C) released its second quarter earnings before opening bell this morning, posting earnings per share of $1.24, excluding items, on $19.4 billion, excluding those same items. Analysts had been expecting the bank to report earnings of $1.06 per share or $3.35 billion on $18.92 billion in revenue. In the same quarter a year ago, Citigroup reported $1.25 per share in earnings on $20.48 billion in revenue.

Earnings including items were 3 cents, and revenues including items were $19.3 billion.

Breaking down Citigroup Inc (C)’s earnings

The bank’s net interest margin rose to 2.87% year over year, while net credit losses fell 16% to $2.2 billion. Citigroup used about $1.1 bilion in deferred tax assets during the quarter and posted a book value per share of $66.76, an increase from last year. Tangible book value rose to $56.89 per share.

Citigroup reported a 3% increase in deposits, which rose to $966 billion. Citicorp loans rose 8% to $585 billion. Citi Holdings assets fell 15% to $111 billion and represented 6% of the bank’s total assets at the end of the June quarter.

Citigroup Inc (C)’s capital position improves

The bank reported a an estimated Basel III Tier One Common ratio of 10.6% and a Basel III Supplementary Leverage Ratio of 5.7% for the quarter.

“Our businesses showed resilience in the face of an uneven economic environment,” Citigroup CEO Michael Corbat said in a statement. “During the quarter, we continued to grow loans in our core businesses, reduce operating expenses by simplifying our products and processes and utilize our deferred tax assets.”

Citigroup’s earnings impacted by CVA / DVA, mortgage settlement

The bank’s second quarter results included a negative impact of $3.8 billion or $3.7 billion after tax to settle RMBS and CDO-related claims. That includes $3.7 billion in legal expenses and $55 million in loan loss reserve build. Citigroup announced this morning that it will pay $7 billion to resolve the investigation of its mortgages.

Officials accused the bank of selling bad mortgages heading up to the financial crisis. Citigroup’s settlement includes $4.5 billion in cash and $2.5 billion in consumer relief. The cash part is made up of a $4 billion civil monetary payment to the Department of Justice plus $500 million to compensate the FDIC and state attorneys general. The bank has been negotiating with officials for two and a half months, and the DoJ threated to sue after Citigroup offered $4 billion and officials demanded $10 billion.

CVA / DVA was -$33 million or -$20 million after tax during the second quarter. That’s compared to $477 million or $293 million after tax in the same quarter a year ago.


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