NEW YORK -- Citigroup's earnings fell 17 percent in the second quarter, hurt by weak results in consumer banking as interest rates remain extremely low, making lending less profitable. The results still beat analysts' forecasts.
Also reporting second-quarter results Friday, Wells Fargo & Co., the world's most valuable bank, said profit fell 2.8 percent as more energy loans soured, expenses rose and revenue from mortgage lending declined.
Citigroup, the New York-based financial conglomerate, said Friday that it earned net income of $4 billion, or $1.25 per share, compared with $4.85 billion, or $1.51 per share, in the same period the year earlier. The results beat the $1.10 per share analysts had expected, according to FactSet.
Revenue fell 10 percent to $17.54 billion, beating the $17.52 billion analysts expected.
"These results demonstrate our ability to generate solid earnings in a challenging and volatile environment, again highlighting the resilience of our institution," Citigroup Chief Executive Officer Michael Corbat said in prepared remarks.
Like its competitor JPMorgan Chase, Citigroup had a strong quarter in its trading operations that helped its profitability, while its consumer-banking franchise remained under pressure. Citigroup reported revenue in its markets and securities services division of $4.7 billion, up 10 percent from a year earlier.
Trading was helped by the U.K.'s vote to leave the European Union, which caused a surge in market volatility in the last days of the quarter.
Also like JPMorgan, Citigroup's investment-banking division saw a slowdown in the quarter as market volatility and political unrest caused companies to stall plans for mergers or other deals. Investment-banking revenues fell 6 percent to $1.2 billion in the quarter, advisory revenues were down 7 percent and underwriting revenue for stock plunged 41 percent in the quarter.
Citigroup's stock fell 12 cents to close Friday at $44.33. The stock is down roughly 15 percent so far this year.
In a statement Friday, San-Francisco-based Wells Fargo said its second-quarter net income slid to $5.6 billion, or $1.01 a share, from $5.72 billion, or $1.03, a year earlier. That matched the average estimate of 30 analysts surveyed by Bloomberg. Mortgage-banking revenue declined 17 percent from a year earlier to $1.41 billion, falling short of the $1.8 billion estimates of Oppenheimer & Co.'s Chris Kotowski and Jefferies Group's Ken Usdin.
"Revenue growth has not been strong enough to offset growth in rising credit costs," said Shannon Stemm, an analyst at Edward Jones & Co. in St. Louis. "Because of that, Wells Fargo, which historically has been a very consistent earnings-per-share grower, has seen earnings per share contract."
Wells Fargo shares fell $1.23, or 2.5 percent, to close Friday at $47.71 in New York. The stock has fallen 12 percent this year.
The lender, led by CEO John Stumpf, has been dealing with worsening energy loans for the past few quarters while also battling to eke out returns as persistently low interest rates have squeezed margins. Net interest margin, the difference between what a bank pays for deposits and earns on loans, decreased 4 basis points in the quarter to 2.86 percent, falling short of some analysts' estimates. The measure has declined the past four quarters.
"It was the energy portfolio which surprised to the downside," Chris Wheeler, an analyst at Atlantic Equities LLP wrote in a note to clients. "The oil and gas portfolio remains under significant pressure."
Provisions for credit losses more than tripled to $1.07 billion from a year earlier, tied largely to the bank's oil and gas portfolio, while net write-offs rose about 42 percent to $924 million, Wells Fargo said. Net interest income, including the loan-loss provision, declined 2.8 percent to $10.7 billion from a year earlier.
Total revenue rose 4 percent to $22.2 billion, in line with analysts' estimates, while expenses climbed 3.2 percent to $12.9 billion on higher employee compensation and benefits. Total loans climbed 7.7 percent to $957.2 billion, while fees collected from cards rose 7.2 percent to $997 million.
Information for this article was contributed by Ken Sweet of The Associated Press, Laura J. Keller and Asjylyn Loder of Bloomberg News.
Business on 07/16/2016