Citi profits edge higher despite worries over consumer finances

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Citigroup profits edged higher in the third quarter, even as chief executive Jane Fraser sounded the alarm about faltering consumer finances.

The bank reported a 2 per cent rise in net income to $3.5bn. Revenues rose almost 9 per cent to $20.1bn.

Citi said the increases were driven by better performance in its Wall Street businesses, with investment banking fees up 34 per cent from a year ago. Citi’s transaction services division also reported one of its best quarters in years.

All five of Citi’s core businesses — corporate lending; credit cards and US consumer banking; transaction services; buying and selling stocks and bonds; and private banking — posted rising sales.

The result was far better than the more than 20 per cent drop in profits that analysts had anticipated the company would report. Its shares erased early gains to close 0.2 per cent lower in New York.

But Citi’s profit rise still trailed gains at rivals JPMorgan Chase and Wells Fargo, and executives warned of a weakening consumer economy. “Continued deceleration in spending indicates an increasingly cautious consumer,” Fraser said on Friday.

The bank said it was still predicting the US would enter a recession during the first half of next year.

Last week, Fraser said “cracks” were emerging in the finances of many Americans. “I think some of the excess savings from the Covid years are getting close to depletion,” she said in a television interview.

There were limited signs of those cracks in Citi’s third-quarter results.

Revenue from credit cards that Citi issues in the name of Costco and other chain retailers rose 21 per cent from a year ago.

On Wall Street, Citi’s revenue from bond, commodity and currency trading was about $350mn higher than analysts had expected and 14 per cent higher than last year. Fees from investment banking rose for the first time since the final quarter of 2021.

But the bank has lagged behind peers in recent years and last month unveiled its largest restructuring in more than 15 years.

Mark Mason, the bank’s chief financial officer, said it would be weeks before Citi set out further details of job cuts at the bank. He denied that uncertainty about the reorganisation was weighing on the bank’s employees or operations.

“When you announce a reorganisation of this magnitude, it creates some uncertainty,” said Mason. “But it was a very strong quarter.”