Profit jumped to $2.85 a share and revenue rose 8% to $23.8 billion, led by a 15% gain in the services business. Shares rose as much as 1.2% before falling about 3.8%, as trading revenue slid 13% from the second quarter.
Citigroup's chief executive called it the best third quarter for revenue in 10 years. By early afternoon the stock was one of the weakest big banks on the day.
Citigroup reported net income of $5.2 billion, or $2.85 a share, up from $1.86 a year earlier, when results included a $726 million goodwill impairment tied to the sale of a stake in its Mexican bank Banamex. Excluding that item, earnings per share rose 27%. Revenue increased 8% to $23.8 billion. The consensus called for $2.65 a share and roughly $23.7 billion of revenue.
"Our performance in the quarter, which included the best third-quarter revenue in a decade, positive operating leverage and meaningful improvement in our returns, reflects the continued disciplined and consistent execution of our strategy," Chair and Chief Executive Jane Fraser said.
The shares rose as high as $133.50 during the session, about 1.2% above Monday's close. By about 1:45 p.m. Eastern they were down 3.8% at $126.93, a swing of nearly 5% from the high.
Where the growth came from
Services, the unit that moves and stores cash for multinational companies, was the engine. Revenue rose 15% to $6.6 billion, with treasury and trade solutions up 16% and securities services up 13%. Net income in services rose 27% to $2.6 billion.
Wealth revenue rose 15% to $3.3 billion, and the unit's net income nearly doubled. Banking revenue grew 6%, or 2% excluding gains on loan hedges, as equity underwriting fees jumped 77%, while advisory and debt underwriting fees fell.
Net interest income across the bank rose 14%. The bank also raised its full-year forecast for net interest income excluding markets to growth in the mid-to-high 6% range.
The weaker lines
Markets revenue rose 6% from a year earlier to $6.1 billion, but fell 13% from the second quarter. Equity trading dropped 25% from the second quarter and rates and currencies fell 9%.
The provision for credit losses rose from a year earlier. Common equity Tier 1 capital held at 12.8%, unchanged from June, while the supplementary leverage ratio slipped to 5.0% from 5.2%. Return on tangible common equity was 11.5%.
In U.S. consumer cards, revenue was flat at $4.7 billion and net credit losses fell 4% to $1.67 billion.
The reaction
The stock's reversal came during a day when bank shares broadly gave back early gains. The SPDR S&P Bank ETF was down about 0.8% and the Financial Select Sector SPDR Fund about 0.3%. Some market commentary pointed to the higher credit provisions and the lower leverage ratio. The bank held its earnings call at 11 a.m.
Market implications
One reading is that the quarter confirms the turnaround. Services and wealth grew faster than the bank, reported expenses fell, returns improved and capital held steady while Citigroup returned $4.1 billion to shareholders.
A second reading is that the stock had priced that in. The shares rose about 1.8% on Monday ahead of the report, trading revenue fell sharply from the second quarter, and a leverage ratio edging lower leaves less room for buybacks if growth slows.
What to watch
Bank of America and Morgan Stanley report Wednesday. Their trading results will show whether the second-quarter-to-third-quarter decline in Citigroup's markets business was industrywide.