CITIGROUP beat estimates for first-quarter (Q1) profit on Tuesday and had the highest revenue in a decade, as geopolitical tensions fueled market volatility and boosted trading revenue, while strong dealmaking buoyed investment banking fees.
Shares of the bank hit their highest since November 2008 on Tuesday, last up 2.9 percent.
Trading desks benefited from heightened volatility across asset classes as the United States-Israeli war on Iran escalated tensions in the Middle East and obstructed oil shipping through the Strait of Hormuz, while concerns over artificial intelligence-driven disruption triggered a selloff in software stocks. The rebalancing of portfolios by clients and sharp price swings boost trading volumes.
Profit increased to $3.06 per share in the three months ended March 31, the third-largest US lender reported on Tuesday. This compares with analysts’ average estimate of $2.65 per share, according to data compiled by LSEG.
Citi beat its target for profitability in the first quarter, posting a 13.1-percent return over tangible common equity. The bank is aiming for 10-percent to 11-percent return for the full year.
“The first quarter is always the strongest, and we have an unclear macro environment ahead,” CEO Jane Fraser said on a call with analysts when asked if the profitability guidance should go up after the first-quarter result.
Its results come after Goldman Sachs kicked off the earnings season for banks on Monday, beating expectations for quarterly profit, driven by strength in dealmaking and equities trading.
Citi reported its highest quarterly revenue in a decade, $24.6 billion, boosted by market volatility which increased its total markets revenue by 19 percent over a year earlier to $7.2 billion.
Fees from equity markets rose 39 percent, helped by growth across derivatives, prime services and cash equities. Prime balances in the markets division jumped more than 50 percent, the firm said.
Revenue in fixed income trading was up 13 percent over a year earlier, rates and currencies revenue rose 6 percent and other fixed income rose 27 percent, driven by strong performance in commodities.
Deals hold up
Hot dealmaking activity by the investment bank increased Citigroup’s banking division revenue by 15 percent in the quarter. Fees in equity underwriting rose 64 percent and in a mergers and acquisitions (M&A) advisory, 19 percent. Fees in fixed income underwriting fell 6 percent.
Industry-wide investment banking revenue rose nearly 14 percent to about $28.2 billion in the first quarter, according to Dealogic.
Citigroup ranked fifth by fees among global banks during the period.
“The M&A pipelines remain strong,” Citigroup Chief Financial Officer Gonzalo Luchetti said. But the CFO noted that if the Middle East conflict remains in place for a very long time, that may have an impact in the second half of the year.
Focused on organic growth
Net interest income, the difference between what a bank earns on loans and pays out on deposits, rose 12 percent.
The wealth management and retail banking division had 11-percent growth in revenue, but it remains the division with the lowest return, 10.8 percent over tangible common equity in the first quarter.
Fraser denied any intention of acquiring other banks or wealth management firms. “I want to be crystal clear, we are only interested and focused on organic growth. Period, end of story,” she said.
Expenses climbed 7 percent in the quarter, mainly driven by costs stemming from higher employee compensation and benefits, including severance costs.
The bank continued to reduce head count in 2026 as part of its ongoing restructuring efforts, with new rounds of layoffs marking the next step in Fraser’s strategy.
Fraser also said the bank has 90 percent of its transformation work completed, including the improvements required by consent orders, with the exception of some regulatory data issues. The completed projects need to go through internal validation and later review by the regulators.
“We demonstrated our commitment to returning capital by repurchasing $6.3 billion in shares during the quarter,” said Fraser.
reuters
