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Citi earnings plunge with COVID onslaught

Citigroup saw its net income for the second quarter of the year plummet by 73 per cent from its year before, as the pandemic increased credit costs and dried up consumer spending.

The US banking giant reported a net income of US$1.3 billion ($1.8 billion) for the quarter, almost a quarter of what it had been during the same period the year before, at US$4.8 billion ($6.8 billion). COVID-19 had driven the decline, with “substantially higher allowance for credit loss reserves” as well as downgrades in the corporate loan portfolio.

The cost of credit for the group was US$7.9 billion ($11.2 billion) in the second quarter, in contrast to $2.1 billion ($2.9 billion) the year before. Citi had made an allowance for credit losses on loans of $26.4 billion ($37.7 billion) at the end of quarter (3.89 per cent of total loans), compared to US$12.5 billion ($17.8 billion) or 1.82 per cent of total loans the year before.

Earnings per share were US$0.50 (71 cents), down from US$1.95 ($2.76) the year before.

However, total revenues were up by 5 per cent year-on-year to US$19.8 billion ($28.2 billion). Citi cited higher sales across the institutional clients group, in fixed-income markets and investment banking.

Citi chief executive Michael Corbat said that while credit costs weighed on the bank’s earnings, its business performance was “strong” during the quarter and it had been able to navigate the pandemic “reasonably well”.

“The institutional clients group had an exceptional quarter, marked by an increase in fixed income of 68 per cent,” Mr Corbat said.

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“Global consumer banking revenues were down as spending slowed significantly due to the pandemic.

“With a sharp emphasis on risk management, we are prepared for a variety of scenarios and will continue to operate our institution prudently given this unprecedented situation.”

The global consumer banking segment saw its revenue drop by 10 per cent to US$7.3 billion ($10.4 billion), with a net loss of US$396 million ($563.6 million) for the quarter (compared with net income of US$1.3 billion the year before).

Meanwhile, the institutional clients group grew its revenue by 21 per cent to US$12.1 billion ($17.2 billion). The segment produced a net income of US$1.8 billion ($2.5 billion), almost half of what it had been a year prior at US$3.4 billion ($4.8 billion).

Across regions, the EMEA area had the greatest year-on-year growth of 15 per cent, contributing US$3.3 billion ($4.7 billion) in revenues. The North America business was up by 13 per cent to US$9.7 billion ($13.8 billion), while Asia stayed somewhat steady, up by 2 per cent to US$4 billion ($5.7 billion).

The Latin America region meanwhile fell by 14 per cent from the year before, to its quarterly revenues of US$2.2 billion ($3.1 billion).

[Related: COVID heightening bank vulnerability to cyber attack]

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