(The Herald Post) – Citigroup Inc revealed impressive first-quarter earnings, defying Wall Street expectations as the bank’s net interest income surged 23% to $13.3 billion. The robust financial performance is attributed to borrowers paying higher interest rates on loans. However, Citigroup also increased its provisions for potential loan losses to $241 million, up from $138 million a year earlier.
The bank now joins the ranks of other banking giants like JPMorgan Chase & Co and Wells Fargo & Co in anticipating and preparing for a potential recession later this year. According to Chief Financial Officer Mark Mason, the economic slowdown is expected to be mild, and the bank is well-prepared to weather the storm.
Citigroup’s first-quarter earnings per share stood at $1.86, beating analysts average estimate of $1.67 as reported by Refinitiv data. Consequently, the bank’s shares experienced a 2.8% uptick. Net income also increased by 7% to $4.6 billion, or $2.19 per share, compared to the $4.3 billion, or $2.02 per share, recorded a year earlier.
The bank’s CFO expressed concern about more clients falling behind on payments in the coming quarters due to the looming mild recession expected in the second half of the year. Nevertheless, credit card delinquencies are still below pre-pandemic levels, and Mason anticipates a return to normal levels of non-conforming loans on credit cards by early 2024.
As the entire banking sector braces for a potential economic slowdown, Citigroup has already tightened its lending standards for consumers and is closely monitoring risks in the banking sector, particularly in regional banks, leveraged lending, and commercial real estate.
Despite challenges faced by the banking sector, Citigroup’s investment in corporate services resulted in a 31% growth in revenues in treasury and trade solutions. The bank also benefitted from asset sales, with revenues from its legacy franchises unit rising 48% to $2.9 billion following the sale of its Indian consumer business to Axis.
Although Citigroup reported the weakest growth among the three major banks that disclosed results on Friday, it still exceeded expectations and managed to buy back $1 billion of stock. The bank’s performance, according to Thomas Hayes of Great Hill Capital, effectively “put a dagger in the heart of the bears.”