Citigroup has reported a 73% drop in its net income for the second quarter 2020 (Q2 2020) to $1.31bn, or $0.5 per diluted share, compared to $4.79bn, or $1.95 per diluted share, respectively, in the same period last year.
The US investment bank attributed the decline in its Q2 2020 net income on the substantially higher allowance for credit loss reserves (ACL). The bank said that this mainly reflected the deterioration in its view of the macroeconomic outlook since the end of Q1 2020 under the Current Expected Credit Loss standard (CECL), and also downgrades in the corporate loan portfolio, which were both due to the continued impact of the Covid-19 crisis.
In the first quarter of 2020, the US investment bank’s net income was $2.52bn.
The bank’s revenues in Q2 2020 were up by 5% to $19.76bn compared to $18.75bn in the prior-year period. Citigroup said that the increased revenues in the reported quarter are mainly due to higher revenues in fixed income markets and investment banking.
Citigroup’s operating expenses in Q2 2020 were down by 1% compared to Q2 2019 at $10.41bn. The bank said that it achieved this through efficiency savings and lesser marketing and other discretionary spend, which more than offset higher compensation expense, investments, and expenses related to Covid-19.
The investment bank’s end-of-period loans were $685bn as of the end of the second quarter, which was almost the same in the prior-year period. On the other hand, its end-of-period deposits were $1.2 trillion as of the end of Q2 2020, marking an increase of 18% compared to Q2 2019.
Citigroup’s global consumer banking unit reported revenues of $7.34bn in Q2 2020, which was 10% less than the $8.13bn reported in the same quarter in the previous year.
The bank’s institutional clients group business witnessed a 21% increase in its revenues in Q2 2020 at $12.1bn compared to $10bn reported in Q2 2019.
Citigroup CEO comments on the Q2 2020 results
Citigroup CEO Michael Corbat said: “While credit costs weighed down our net income, our overall business performance was strong during the quarter, and we have been able to navigate the COVID-19 pandemic reasonably well.
“The Institutional Clients Group had an exceptional quarter, marked by an increase in Fixed Income of 68%. Global Consumer Banking revenues were down as spending slowed significantly due to the pandemic.
“We entered this crisis from a position of strength. During the quarter, our regulatory capital increased and our CET1 ratio improved to 11.5%, comfortably above our new regulatory minimum of 10%. We continued to add to our substantial levels of liquidity and our balance sheet has plenty of capacity to serve our clients.
“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.”
