Citigroup Inc. said Friday its second-quarter profit rose 18 percent as strong overseas operations helped the biggest U.S. bank pull in record revenues.
The New York-based bank, like its competitors, has taken advantage of faster-growing markets around the world as the sluggish U.S. housing market and other factors slow domestic business.
Citigroup said net income rose to $6.23 billion, or $1.24 per share, in the April to June period, from $5.27 billion, or $1.05 a share, in the same period a year earlier.
Revenue in the quarter grew 20 percent to a record $26.63 billion from $22.18 billion a year earlier. International revenue soared 34 percent to $12.56 billion.
The results beat the average forecast of analysts surveyed by Thomson Financial of earnings of $1.13 a share and revenue of $24.89 billion.
“We have very clear priorities to drive growth and we are executing on all of them,” said Chairman and Chief Executive Charles Prince in a statement accompanying the report. “We generated record revenues, up 20 percent, and record earnings from continuing operations, up 18 percent, both driven by our record international results.”
Investors appeared pleased that expenses were under control. Operating expenses rose 16 percent due to higher business volumes and acquisitions — the company said it opened or bought 160 new retail bank or consumer branches in the second quarter, 136 of which were abroad.
In early April, the bank announced 17,000 job cuts, 9,500 position shifts to cheaper locations and a consolidation of corporate operations, to slash $2 billion from this year’s operating costs.
However, credit costs rose $934 million, as net credit losses increased $259 million and after Citigroup padded its loan loss reserves by $465 million, compared with a release of $210 million from its reserves in the second quarter of 2006. The bank said it saw higher delinquencies in second mortgages in consumer lending, and that it altered loan loss estimates that could arise in its credit cards portfolio.
While the stock market has climbed this week, the financial sector has taken a hit, as major banks reporting financial results this week — including Bank of America Corp., JPMorgan Chase & Co. and Washington Mutual Inc. — said they have set more money aside to account for borrowers who may shirk payments. That suggests banks expect a dicier lending climate, which could lead to restrained investing, or worse, losses.
Jitters over risky lending were exacerbated when Bear Stearns Cos. said Tuesday that two hedge funds that bet on bonds backed by subprime mortgages plunged from $1.5 billion in value to practically nothing. Last week, Standard & Poor’s and Moody’s Investors Service said they were downgrading billions of dollars worth of bonds backed by such risky home loans.
Citigroup sells bonds backed by subprime mortgages, or mortgages sold to people with poor credit. The bank’s CitiMortgage unit was the nation’s largest subprime mortgage lender in the first quarter, according to the most recent data from trade publication Inside B&C Lending.
Citigroup’s consumer lending posted a 23 percent climb in revenue in the second quarter, which helped drive the bank’s overall U.S. consumer division revenue up 3 percent to $7.78 billion. The international consumer group’s revenue grew 16 percent to $5.89 billion.
The markets and banking division saw a 33 percent rise in revenue to $8.96 billion — helped by a 50 percent rise in international markets and banking revenues to $5.92 billion.
Citigroup sees Asia and Latin America as particularly lucrative regions. The bank has recently taken steps to list shares on the Tokyo Stock Exchange, and boosted its stake in Nikko Cordial Corp. to gain full control of the third-largest retail brokerage in Japan. Thursday, Citigroup announced a partnership with the company that runs Banco de Chile to get more customers there.
Revenue in global wealth management rose 28 percent to $3.20 billion.
In the alternative investments division, revenue soared 77 percent, to more than $1 billion.
Meanwhile Friday, Charlotte, N.C.-based Wachovia Corp. reported a 24 percent gain in second-quarter profit, which met analyst expectations.