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Citigroup’s earnings rise, beating expectations

Earns CitigroupEarns Citigroup

Citigroup second quarter earnings showed the long troubled bank is pulling itself out of its hole.

What you need to know: Net income for Citigroup (C) soared to nearly $4.9 billion for the second quarter. That translated to earnings per share of $1.53. Analysts had been expecting $1.34. The bank earned $0.03 per share in last years second quarter, which was dragged down by a big legal expense. Despite the better than expected earnings, Citigroup’s revenue was basically flat from a year ago. The bank had sales of nearly $19.5 billion in the quarter. The biggest reason for the earnings increase was cost cutting. Citi’s expenses fell 30% from a year ago. Citi’s expenses last year were higher than normal because of the bank’s large legal settlement with the government over mortgage bonds. Without that, and an accounting adjustment, expenses would have fallen 7%, or by $800 million.

The big number: Citi’s bottom line is higher than it has been in nearly a decade. The second quarter earnings was the most the bank has earned in any three month period in eight years. Even after adjusting for legal expenses, which held down profits in last year’s second quarter, earnings rose 18%.

What you may have missed: Citi’s earnings were helped by the fact that it has less on reserve to cover bad loans, which is good. That mean’s Citi believes it has fewer bad loans. But gains from so-called reserve releases are hard to repeat. Citi also charged off fewer bad loans as well. Put those two things together, and Citi got a $670 million boost in the quarter from improving loans.

That being said, Citi’s lending didn’t increase in the quarter. The bank’s total loans outstanding dropped 5% in the quarter. Loans to consumers were down 11%. Corporate loans rose 2%.