Citigroup Earnings Rise 13% as It Discloses a Second Inquiry in Mexico
Citigroup said on Tuesday that its profit increased 13 percent in the third quarter from a year ago, as trading picked up and credit losses continued to decline, but its results were sullied by the disclosure of another fraud investigation in its Mexican unit.
The bank reported profits of $1.15 a share and revenues of $19.97 billion, adjusting for one-time items. Wall Street analysts surveyed by Thomson Reuters expected adjusted net income of $1.12 a share and revenue of $19.05 billion.
Citigroup also announced on Tuesday that it was scaling back its consumer business across Europe, Latin America and Asia, and that it had opened a second internal investigation into fraud in its Mexican unit, Banamex.
The fraud involves a personal security service business and comes in addition to the internal inquiry that Citigroup is pursuing related to a fraud related to a Mexican oil services firm.
'The conduct of the individuals involved is appalling,'' Citigroup's chief executive, Michael Corbat, said in a statement.
The retreat from 11 markets including South Korea, Japan, Hungary, Egypt, Guatemala and Guam comes as part of Citigroup's broader effort to jettison businesses with little promise of generating big profits for the bank.
The plan to cast off the international consumer businesses, which are expected to be completed by the end of 2015, represents another milestone for the sprawling global bank. Since the financial crisis, Citigroup executives, including Mr. Corbat, have been trying to simplify the bank's business lines and hone its strategy to focus on investment banking and more affluent consumers, particularly in the United States.
That effort to simplify its operations gained urgency earlier this year after Citigroup was rocked by a $400 million fraud in its Mexican unit and the Federal Reserve rejected the bank's capital plan, citing concerns about its projections for potential losses in 'material parts' of its global operations.
While the Fed was not more specific, many analysts perceived the regulator was signaling its worries that Citigroup was essentially too sprawling to manage properly.
The third-quarter results reflected some of the progress the bank has made at restructuring. A big driver of revenue in the quarter came from a pick-up in trading revenues and a profit in Citi Holdings - a sort-of bad bank where Citigroup has housed many of its troubled or unwanted assets since 2009.
On an adjusted basis, the bank's overall revenue in the third quarter increased 10 percent from a year ago. Citigroup also avoided any large legal expenses like the $3.8 billion charge that the bank took in second quarter related to its mortgage settlement with the Justice Department.
The consumer businesses in the 11 countries will be moved over into Citi Holdings, as they are marketed to potential buyers. The bank is already in the process of selling most of the retail businesses. including its branches in Japan, people briefed on the matter said.
Citigroup is also spinning off its subprime consumer lending unit, called OneMain Financial. Last week, OneMain disclosed that it planned to sell at least $50 million in shares, but did not disclose when it expected an initial public offering would take place.
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