Three hours into trading, Citigroup (C 0.32%) is up by 2.1%, easily beating the market and its financial sector peers -- no surprise considering the strong second-quarter earnings the superbank reported this morning.
This just in
For the second quarter of 2013, Citi grew its net income by 42% and its total revenue by 11%, year over year. Earnings per share were $1.34, up from $0.95 a year ago.
Deposits were also up from a year ago, by 3%, as were loans. Assets in Citi Holdings declined significantly, as well.
Foolish bottom line
42% income growth is sure to bring a smile to any shareholder's face anytime, but especially when it's paired with revenue growth of 11%. Last quarter, we saw banks with big income growth but little, if any, revenue growth, which means the income growth was coming from cuts.
The big banks grew as big as they did in part because of the housing boom, as excess lending led to excess employment. And in the wake of the crash, even more employees were brought on to clean up the mess made by the excess lending. As a result, banks had previously been growing their incomes by cutting fat, but you can only cut so much fat before you start cutting into muscle.
Growth in deposits and lending is also the kind of organic growth we like to see at any bank. At heart, Citi is a traditional bank, and retail and commercial lending and deposits are unexciting but fundamental drivers of strong, healthy banks.
As for the decline in assets at Citi Holdings, that's also highly encouraging. Citi Holdings is the "bad bank" created in the aftermath of the financial crisis to hold those lines of business the bank no longer saw as core to its future, as well as where the bank put its not-inconsiderable holdings of toxic assets. The second quarter saw those assets down by 31% year over year, the biggest reduction in assets by percentage since 2010.
Global consumer banking revenue was up by 2%, as well -- no small feat given the economic weakness in both first- and third-world foreign markets. That Citi could grow those at all is a testament to its own newfound, post-crash organizational adeptness: This overseas growth, coupled with the significant decrease in Citi Holdings, offers some proof that the restructuring of the superbank begun under previous CEO Vikram Pandit and continued under current CEO Michael Corbat is working.
