Citigroup Beats Estimates Yet Profits Still Fall 12%

Citigroup Beats Estimates Yet Profits Still Fall 12%Citigroup Inc. (NYSE:C) reported its second quarter earnings this morning, and while the bank beat analysts estimates, Citigroup still saw a 10% drop in revenue, as well as a profit reduction of 12%.  Specifically, Citigroup reported earnings of $0.95 a share on a reported revenue of $18.6 billion.

During the second quarter, Citigroup did see a few onetime charges and such that could have been the main culprit in the revenue and profit loss. Citi saw a onetime loss of $424 million, when the bank sold its stake in Akbank in Turkey.  Additionally, the bank saw a gain of $219 million due to debt valuation.  If we went ahead and excluded these onetime charges, Citi reported earnings of $1 a share on revenue of $18.8 billion.  Analysts on an adjusted basis were looking for earnings per share of $0.89 on revenue of $18.9 billion.

The fact of the matter is, current economic headwinds, combined with the majority of the banking sector being downgraded by Moody’s Corporation, (NYSE:MCO) and new regulations have seriously damaged some prospects for these banks.

Citigroup is the third bank to report its second quarter earnings so far, as Wells Fargo & Company (NYSE:WFC) and JPMorgan Chase & Co. (NYSE:JPM) reported earnings on Friday.  If you remember that I said Citigroup saw profits fall 12%, that will help you be able to compare with Wells Fargo’s 17% surge in profits, and JP Morgan’s profit fall of 8.7%.

Judging solely on reported profits compared to the second quarter of 2011, Wells Fargo is clearly the winner, and the only bank so far to report higher earnings than last year.  The reasoning behind this is because Wells Fargo was one of the few banks that were able to escape Moody’s downgrade spree.  This means that the bank doesn’t share the same worries of higher interest rates, more expensive loans, declining reserves and profits, as some of its other banking competitors.

JPMorgan’s drop in profit was mostly due to its, now total, loss of $5.8 billion from a trade made with a trader named the “London Whale”.  Even more inexcusable is the fact that the bank found out that some the trades involved in the large loss, covered up some of the losses to make it seem less damaging than it truly was.

The bottom line here is banks are in a fragile state right now, unless you are Wells Fargo.  Woes will continue as tough economic conditions and rising costs plague the banking sector.

Disclosure: No Positions


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