On a busy day for bank earnings, Citigroup (NYSE:C) was one of three big U.S. banks to report results, and despite an earnings beat, the report wasn't great. While the bank's efficiency was strong and loans and deposits grew, the bank missed expectations in several key areas, including trading revenue. Here's a rundown of the numbers and how Citigroup's earnings compare with the other big banks.
The headline numbers
Just looking at the headline numbers shows that Citigroup's second quarter was a mixed bag. The bank earned $1.63 per share for the quarter, which handily beat the $1.56 that analysts had been looking for. Furthermore, this represents impressive 27% year-over-year earnings growth.
To be fair, some of this was a result of tax reform, as the lower corporate tax rate in the Tax Cuts and Jobs Act lowered the bank's effective tax rate to 24% from 32% a year ago.
Beyond the headlines: The good
- Outstanding share count declined by 8% year over year thanks to aggressive buybacks.
- In the consumer areas of the business, Citigroup grew nicely. Loans and deposits both grew by 4% from the same quarter a year ago.
- Net interest margin increased by six basis points (0.06%) over the first quarter to 2.70%.
- Its efficiency ratio of 58% is among the best of the big four, and shows the bank is doing a solid job of controlling expenses.
- As we learned a couple of weeks ago, Citigroup's dividend will be increasing to $0.45 per share beginning in the third quarter, a 41% increase from the previous level.
Some key misses
On the other hand, there was some disappointing news as well.
- Citigroup's deposits of $996.7 billion, while representing growth, were less than the roughly $1.01 trillion analysts had been expecting.
- Corporate lending revenue fell by 20% year over year.
- Return on equity of 9.2% makes it the only one of the big four banks that is short of the 10% industry benchmark. It's also down from 9.7% during the first quarter. The bank's 0.94% return on assets also falls short of the industry standard.
- Trading was a big disappointment. After fellow big bank JPMorgan Chase (NYSE: JPM) reported a big trading beat earlier in the morning, Citigroup's trading revenue missed on both the fixed-income side ($3.08 billion versus $3.11 billion expected) and the equities side ($864 million versus $1.1 billion).
Not the best of the early bank earnings
Three of the big four U.S. banks reported earnings on Friday morning -- Citigroup, JPMorgan Chase, and Wells Fargo (NYSE: WFC). JPMorgan Chase posted an excellent second quarter, including the excellent trading revenue performance. Wells Fargo, on the other hand, was largely a disappointment as the bank's scandal-plagued past few years are clearly still weighing on its results.
Citigroup falls in the middle of the three. As I discussed, there was certainly some good news, but there were also some key disappointments.