Key points:

  • Citigroup beat analysts’ earnings expectations in the second quarter, reporting net income of $1.52 per share.
  • Revenue rose 4% to $20.1 billion compared with the same period last year.
  • Citigroup shares fell 2% after the report, reflecting investor concerns about expenses, dividends and market share.

Citigroup reported better-than-Wall Street-expected second-quarter earnings in its second-quarter earnings report Friday. This growth was driven by a surge in revenue from investment banking, markets and services. However, the company’s shares fell 2%, reflecting investor concerns about costs, dividend policy and market share.

Bank report results

Citigroup, the third-largest U.S. lender, beat analysts’ earnings expectations in the second quarter, posting net income of $1.52 per share for the three months ended June 30. However, this result fell short of the 11-12% shareholder return target set by Moody’s Ratings.

The increase in profit was driven by revenue growth of 4% to $20.1 billion compared to the same period last year, helped by a $400 million gain from the conversion and partial sale of Visa shares.

Strong results in its investment banking, markets and banking segments were partially offset by a $136 million fine imposed on Citigroup by US regulators for “insufficient progress” in addressing data management issues.

Despite the growth, Citigroup still faces challenges and will need to demonstrate sustained improvements in its metrics and data management to meet investor expectations.

Citigroup answered investor questions

During a conference call with analysts, Citigroup CEO Jane Fraser and CFO Mark Mason answered questions at length about the bank’s share repurchase and dividend plans in the context of its regulatory concerns.

Citigroup announced a potential share repurchase of up to $1 billion in the next quarter. Fraser emphasized that regulators don’t prevent the payment of dividends to shareholders. Mason and Fraser also noted that the bank’s plan to allocate resources to address regulatory issues has not yet been agreed upon with supervisors.

In the event of delays in regulatory work, Citi intends to conduct a thorough analysis of the reasons and determine whether additional costs are required for technology, software, platform adjustments or additional staffing, Mason added.

Executives explained the bank’s data quality concerns, saying Citi had consolidated many of the systems that collect data for regulatory reporting. However, more work is required to ensure that reports containing thousands of data points are based on quality information and don’t require manual review by employees. The CFO also emphasized that priority is given to regulatory reports that are most important to US regulators.

As part of a major restructuring aimed at improving efficiency, cutting costs and simplifying its structure, Citigroup plans to cut 20,000 employees over the next two years.