Citigroup Inc., the nation’s largest financial institution, said its third-quarter earnings rose 35 percent, boosted by a big gain from the sale of its life insurance and annuities business. Wachovia Corp.’s earnings soared 32 percent, fueled by strong revenue growth from its acquisition of regional bank SouthTrust Corp. and higher fees and lending income.
Wachovia’s results were helped by strong retail banking performance, but Citigroup’s were dampened somewhat by weaker performance in its North American credit card and consumer finance divisions because of the recent surge in bankruptcy filings and tight net interest margins.
In afternoon trading, Citigroup shares fell 24 cents to $44.80 on the New York Stock Exchange. Wachovia’s shares slipped 30 cents to $47.55, also on the Big Board. Citigroup stock has traded in a 52-week range between $42.10 and $49.99, while Wachovia’s have ranged from $46.30 to $56.28 over the past year.
New York-based Citigroup said net income totaled $7.14 billion, or $1.38 per share, in the third quarter, up from $5.3 billion, or $1.02 per share, a year earlier. The latest figures included a hefty $2.12 billion gain from the sale of its Travelers Life & Annuity business to MetLife Inc. in a deal that closed in the third quarter.
Excluding the sale of Travelers and a handful of special charges, income from continuing operations was 97 cent per share in the third quarter, up from 96 cents a year earlier.
The special charges included $222 million in costs related to Hurricane Katrina, $124 million in credit-card losses because of the recent rush of bankruptcies and a $94 million increase in corporate loan loss reserves. The Katrina costs cut earnings by 4 cents per share, Citigroup said.
Revenue increased 15 percent to nearly $21.5 billion in the third quarter from $18.74 billion a year earlier.
The Prudential Equity Group estimated the bank’s operating earnings at $1 to $1.02, “a touch above consensus of 99 cents” from analysts surveyed by Thomson Financial.
“I feel very good about our competitive position,” Charles Prince, the company’s chief executive officer, told a phone conference with analysts.
He added that Citigroup would continue repurchasing stock. Citigroup bought back about 124 million shares for some $5.5 billion in the third quarter.
Prince noted that the bank’s results were buoyed by “excellent performance in our corporate and capital markets driven businesses.”
This, he said, “offset sluggish revenue growth” in the domestic banking division, which continued to feel the effects of a flattening yield curve — the result of rising short-term rates and comparatively low long-term rates. This squeezes the so-called net interest margin, which is the difference between what banks pay to borrow money and what they can earn when they lend it.
Citigroup said tighter net interest margins affected its results in both its North American card division and its North American consumer finance division.
James Schmidt, executive vice president of John Hancock Funds in Boston, called Citigroup’s earnings “okay,” adding: “You’d be more excited if there was more growth in U.S. consumer operations.”
He said the provisions for higher bankruptcy chargeoffs and Katrina fallout could be aimed at getting them out of the way “to set Citi up for better numbers next year.”
For the first nine months of the year, Citigroup reported net income of $17.66 billion, or $3.39 a share, up from $11.73 billion, or $2.24 per share, in 2004. Net income from continuing operations was $14.8 billion, or $2.85 a share, up from $10.9 billion, or $2.09 a share.
Wachovia, the nation’s fourth-largest bank, said its net income totaled $1.67 billion, or $1.06 per share, in the third quarter, up from $1.26 billion, or 96 cents, a year earlier.
Without merger-related charges, Wachovia’s third-quarter earnings were $1.09 per share. That beat the consensus estimate of $1.07 per share from analysts polled by Thomson Financial.
Revenue totaled $6.7 billion in the quarter, up 19 percent from $5.63 billion a year earlier and also ahead of analysts’ consensus target of $6.46 billion.
Wachovia, which is based in Charlotte, N.C., said net interest income grew 14 percent in the quarter, reflecting increased loans and deposits, while fee and other income rose 25 percent.
“The bottom line for us is we are experiencing excellent revenue growth...,” Chairman and Chief Executive Ken Thompson told a conference call with analysts. He added: “We have good expectations for the fourth quarter and all of 2006.”