Citi's Mixed Results Underscore Global Risks

By WSJ City 

Citigroup's quarterly results on Monday reflected the conventional wisdom about the current state of the global economy: US consumers are going strong while corporate sentiment -- particularly in Asia -- is weakening due to trade tensions, writes Aaron Back for Heard on the Street. But there is another message in the results: the threat of lower interest rates that hangs over Citi and all of its US peers.

KEY POINTS

   -- The most international US bank reported better-than-expected earnings for 
      the second quarter. 
 
   -- That's largely due to a one-time gain on a stake it holds in electronic 
      bond-trading platform Tradeweb. 
 
   -- Excluding this, earnings were more or less in line with estimates. 
 
   -- The bank's global consumer business performed well with revenue growing 
      by 4% from a year earlier. 
 
   -- Its branded US credit cards thrived with revenue shooting up 7% from a 
      year earlier to $2.2bn. 

Analysis

Citi's corporate business was less robust. Business lending in Asia hasn't grown for three straight quarters and was down 7% from a year earlier in the second quarter. This isn't a small business, with $63bn of loans outstanding in the second quarter, or around 18% of Citi's institutional loans world-wide. On a conference call, CFO Mark Mason confirmed that US-China trade tensions have hurt companies' appetite to borrow in the region. Citigroup is more exposed to this than US peers.

That same international footprint means Citigroup is less-affected than many American banks when the Federal Reserve cuts rates, as it is expected to later this month. Nonetheless, the impact would be significant.

A fuller story is available on WSJ.com

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(END) Dow Jones Newswires

July 16, 2019 02:59 ET (06:59 GMT)

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