Citi profit jumps 42% as market volatility lifts trading revenue

Citi Bank sign is seen in Chicago. Citigroup Citibank

Citigroup’s first-quarter profit rose 42 per cent as geopolitical tensions fueled market volatility and trading revenue, while strong dealmaking buoyed investment banking fees.

Trading desks benefited from heightened volatility across asset classes as the U.S.-Israeli war on Iran escalated tensions in the Middle East and obstructed oil shipping through the Strait of Hormuz, while concerns over AI-driven disruption triggered a sell-off in software stocks. The rebalancing of portfolios by clients and sharp price swings boost trading volumes.

Profit increased to US$5.8 billion, or $3.06 per share, in the three months ended March 31, the third-largest U.S. lender reported on Tuesday. This compares with $4.1 billion, or $1.96 per share, a year earlier.

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Citi beat its target for profitability in the first quarter, posting a 13.1 per cent return over tangible common equity. The bank is aiming at 10 per cent to 11 per cent return for the full year.

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.

The largest U.S. lender, JPMorgan Chase and Wells Fargo beat estimates for first-quarter profit on Tuesday. Bank of America and Morgan Stanley will report on Wednesday, April 15.

Citi reported its highest quarterly revenue in a decade, $24.6 billion, boosted by market volatility during the first quarter which increased its total markets revenue by 19 per cent over a year earlier to $7.2 billion.

Revenue in equities trading rose 39 per cent, fixed income trading revenue was up 13 per cent over a year earlier, rates and currencies revenue rose six per cent and other fixed income rose 27 per cent, driven by strong performance in commodities.

Deals hold up

Hot dealmaking activity by the investment bank increased Citigroup’s banking division revenue by 15 per cent in the quarter. Fees in equity underwriting rose 64 per cent and in M&A advisory, 19 per cent. Fees with fixed income underwriting fell six per cent.

Prolonged geopolitical uncertainty did not have a big effect on transactions in the first quarter, but may weigh on dealmaking and derail the strong momentum.

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Industry-wide investment banking revenue rose nearly 14 per cent to about $28.2 billion in the first quarter, according to Dealogic. Citigroup ranked fifth by fees among global banks during the period.

Interest income rises

Net interest income, the difference between what a bank earns on loans and pays out on deposits, rose 12 per cent.

The wealth management and retail banking division had 11 per cent growth in revenue, adjusting for the transfer of assets Citi did over the last 12 months. The division had the lowest return within the bank, 10.8 per cent over tangible common equity.

Shares of Citigroup have risen 104.9 per cent over the past 12 months, outperforming Wall Street peers and the KBW bank index, as progress in its turnaround under CEO Jane Fraser boosted investor confidence. Citi’s valuation still lags peers.

(Reporting by Prakhar Srivastava in Bengaluru and Tatiana Bautzer in New York; Editing by Devika Syamnath and Megan Davies)