Citigroup Inc.'s (C) second-quarter profit fell 12% from a year
earlier amid a decline in revenue and a smaller benefit from
releasing reserves set aside for losses from defaulting loans.
Citi's focus has been on growing abroad and cutting expenses,
but second-quarter results were caught in the cross current of the
rising dollar--but benefited in North America from the booming
mortgage business driven by low interest rates and government
programs for struggling home owners.
The $2.9 billion profit, flat from the first quarter, beat the
average analyst estimate. Revenue fell 9.7% from a year earlier, to
$18.6 billion, and slipped slightly from the first quarter in part
because Citi's $219 million gain from the valuation of its own debt
was considerably smaller than the loss in previous quarters.
Chief Executive Vikram Pandit called the quarter "solid" and
pointed to the diverse set of businesses. Expenses declined, and
Pandit reiterated that the focus on reducing operating costs would
continue. Total loans rose 1% from a year earlier, to $655
billion.
Pandit rebuilt Citi after the financial crisis around its
international operations. But, uncharacteristically, the consumer
business in North America ended up doing better than abroad because
revenue from deposits and consumer lending in Asia and Latin
America were hampered by the impact of translating the foreign
currency income into dollars.
Revenue in the international consumer business would have been
up 4% had currency swings not pushed the revenue down, while
revenue in North America's consumer business remained flat.
Overall, revenue in Citi's consumer business remained roughly flat
from a year earlier, at $9.8 billion.
Net income in all consumer businesses fell slightly from a year
earlier, to $2 billion, and rose in securities and banking, to $1.4
billion.
Capital markets revenue, however, held its own in a difficult
trading quarter where bankers struggled with uncertainties about
economic growth in the U.S. and Asia, while Europe continued to
struggle with its debt crisis. The securities and banking segment's
revenue were flat from a year earlier and rose slightly from the
previous quarter, benefiting from the strength in the interest
rates and currency markets.
Citi's third segment, transaction services, did well as usual.
And Citi Holdings--the division in charge of shrinking assets and
business that are troubled or Citi no longer considers core to its
operations--continued to shrink as planned; it generated a $920
million loss.
Citi reduced its reserve for bad loans by $984 million, half of
what it released into earnings a year earlier, and booked a $424
million loss from the sale of a 10% stake in Akbank TAS (AKBNK.IS).
Citi retains a 9.9% stake in the Turkish bank.
Citi's per-share earnings of 95 cents beat analysts' estimates,
even excluding the gain from the valuation of its own debt.
Analysts polled by Thomson Reuters had expected 89 cents a share,
excluding mark-to-market adjustments on debt gains.
--Saabira Chaudhuri contributed to this article.
Write to Matthias Rieker at matthias.rieker@dowjones.com