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Costs help Citi beat Wall Street view; consumer debts rise

12 October 2017

(NYSE:C.) edged lower in early deals on Thursday despite the USA investment bank reporting better-than-expected third quarter results.

Institutional Clients Group revenues grew 9% to $9.23 billion.

"We all would anticipate greater loan growth if there was a bit more clarity as far as you know when or if tax reform was going to pass", Chief Financial Officer John Gersprach told reporters.

Earnings per share rose about 15 percent to $1.42 from $1.24 as the company shrank the number of shares outstanding by 7 percent - buying back stock under its biggest capital return plan approved by the U.S. Federal Reserve. The company said that it had $1.42 in earnings per share (EPS) and $18.2 billion in revenue, compared with consensus estimates from Thomson Reuters that called for $1.32 in EPS and revenue of $17.9 billion. However, that decline was offset by a 16% increase in equity trading revenue.

Overall, however, trading dropped 11 percent, dragged under by Citi's large fixed income division.

Citi and JPMorgan are kicking off the earnings cycle for USA banks, which have for weeks been preparing investors for just such a blow to trading results.

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Bank of America Corp and Wells Fargo & Co, the second- and third-biggest USA banks by assets, are scheduled to report quarterly results on Friday. We had revenue increases in numerous products we have been investing in, tightly managed our expenses, and again saw loan growth in both our consumer and institutional businesses.

Net income rose 7.6 percent to US$4.13 billion in the third quarter ended September 30.

Consumer credit is a cause for concern for the bank as Citigroup said its company-wide net credit losses rose 17 percent from a year earlier.

Citigroup this year has been ratcheting up its expectations for soured loans for its two North American credit card businesses, Citi-branded cards and cards issued for stores.

Citi cited "continued growth in loans and assets under management" for the rise, as well as higher interest rates.

Bank of America Corp and Wells Fargo & Co, the second- and third-biggest US banks by assets, are scheduled to report quarterly results on Friday. This is down 16% from its fixed income markets revenue of $3.41 billion reported during the same time previous year. Corbat's target for the measure of profitability is 10 percent in 2019 and 14 percent longer term.

Costs help Citi beat Wall Street view; consumer debts rise