New York – Citigroup reported net income for the third quarter 2023 of $3.5 billion, or $1.63 per diluted share, on revenues of $20.1 billion. This compares to net income of $3.5 billion, or $1.63 per diluted share, on revenues of $18.5 billion for the third quarter 2022.
Revenues increased 9% from the prior-year period, largely driven by strength across Services and Markets in Institutional Clients Group (ICG) and US Personal Banking within Personal Banking and Wealth Management (PBWM), as well as growth in Banking in ICG. This increase was partially offset by a revenue reduction from the closed exits and wind-downs within Legacy Franchises.
Third quarter results included divestiture-related impacts of $299 million5 in earnings before taxes ($214 million after-tax), primarily driven by a gain on the sale of the Taiwan consumer business, recorded in Legacy Franchises. Excluding these divestiture-related impacts, earnings per share was $1.525. This compares to divestiture-related impacts in the third quarter 2022 of $519 million5 in earnings before taxes ($256 million after-tax), also recorded in Legacy Franchises, and earnings per share of $1.50, excluding divestiture-related impacts5.
Net income of $3.5 billion increased 2% from the prior-year period. Excluding divestiture-related impacts5, net income increased 3%. The increase in net income was primarily driven by the higher revenue, partially offset by higher expenses and higher cost of credit.
Citi CEO Jane Fraser said, “Despite the headwinds, our five core, interconnected businesses each posted revenue growth resulting in overall growth of 9%. Services, our fastest growing business, grew by 13% with Treasury and Trade Solutions having its best quarter in a decade. Markets was up 10% driven by strength in Fixed Income. Banking activity played to our mix and grew 17%, bolstered by a rebound in debt issuance and some signs of life in the equity capital markets. U.S. Personal Banking also had double-digit revenue growth while a continued deceleration in spending indicates an increasingly cautious consumer. And Wealth revenues grew as the business continues to win new mandates and acquire new clients.
“Our CET1 ratio grew to 13.5% which is $14 billion above our current regulatory minimum after returning $1.5 billion to our shareholders through common dividends and share repurchases. Our discipline of growing operating deposits has enabled us to maintain a stable deposit base. Taken with our high-quality asset portfolio, strong reserve levels, ample liquidity and diversified earnings base, we are proving to our clients that we truly are a bank for all seasons.
“Last month we announced consequential changes that align our organizational structure with our strategy and changes how we run the bank. When completed, we will have a simpler firm that can operate faster, better serve our clients and unlock value for our shareholders,” Ms. Fraser concluded.
Percentage comparisons throughout this press release are calculated for the third quarter 2023 versus the third quarter 2022, unless otherwise specified.
Third Quarter Financial Results
Citigroup revenues of $20.1 billion in the third quarter 2023 increased 9%. The higher revenues reflected strength across Services, US Personal Banking and Markets, as well as growth in Banking, which was offset by the revenue reduction from the closed exits and wind-downs.
The operating expenses of $13.5 billion in the third quarter 2023 increased 6%, largely driven by investments in risk and controls, severance and the impact of inflation. The expense increase was partially offset by productivity savings and expense reductions from the closed exits and wind-downs.
The cost of credit was approximately $1.8 billion in the third quarter 2023, compared to $1.4 billion in the prior-year period, primarily driven by the continued normalization in net credit losses and volume growth in cards in PBWM. A net build in the allowance for credit losses (ACL) for loans and unfunded commitments of $125 million was primarily driven by Branded Cards and Retail Services, largely related to growth in card balances.
Group’s net income of $3.5 billion in the third quarter 2023 increased 2% from the prior-year period, primarily driven by the higher revenues, partially offset by the higher expenses and the higher cost of credit. Citigroup’s effective tax rate increased to approximately 25% in the current quarter versus 20% in the third quarter 2022, primarily driven by a different geographic mix of pre-tax earnings in the current quarter.
Its total allowance for credit losses on loans was approximately $17.6 billion at quarter end, compared to $16.3 billion at the end of the prior-year period, with a reserve-to-funded loans ratio of 2.68%, compared to 2.54% at the end of the prior-year period. Total non-accrual loans increased 14% from the prior-year period to $3.3 billion. Corporate non-accrual loans increased 33% to $2.0 billion. Consumer non-accrual loans decreased (7)% to $1.3 billion.
Citigroup’s end-of-period loans were $666 billion at quarter end, up 3% versus the prior-year period, largely reflecting growth in US Personal Banking.
The end-of-period deposits were approximately $1.3 trillion at quarter end, down (3)% versus the prior-year period. The decline in deposits was largely due to a reduction in Services, reflecting quantitative tightening, a shift of deposits to higher-yielding investments in Global Wealth Management and a reduction of institutional certificates of deposit in Corporate/Other.
Citigroup’s book value per share of $99.28 and tangible book value per share of $86.90 at quarter end increased 7% and 8%, respectively, versus the prior-year period. The increases were largely driven by net income to common, common share repurchases, and beneficial movements in the accumulated other comprehensive income (AOCI) component of equity, partially offset by payment of common dividends. At quarter end, Citigroup’s CET1 Capital ratio was 13.5% versus 13.4% in the prior quarter, as net income to common, a benefit from the Taiwan consumer exit and a lower deferred tax assets deduction were partially offset by common dividends and share repurchases. Citigroup’s Supplementary Leverage ratio for the third quarter 2023 was 6.0%, which was largely unchanged from the prior quarter. During the quarter, Citigroup returned a total of $1.5 billion to common shareholders in the form of dividends and repurchases.