Citigroup profit beats estimates on investment banking boost, shares rise

By Manya Saini and Tatiana Bautzer

NEW YORK (Reuters) - Citigroup's profit was broadly steady and beat third-quarter estimates as it benefited from rising interest payments and surging investment banking fees, sending its shares up 3% in premarket trading on Friday.

CFO Mark Mason said in a call with reporters that the reorganization plan will result in a 15% reduction in functional roles for its top two layers of management. The first phase of the plan eliminated 60 net committees, the bank said.

Citi's net income rose 2% to $3.5 billion from a year ago, while earnings per share remained stable at $1.63. On an adjusted basis, it earned $1.52 to beat LSEG estimate of $1.21.

Revenue at Citi's institutional clients group that houses its Wall Street operations rose 12% from a year ago, fueled by a 34% jump in investment banking fees. The gains were a bright spot after several quarters of depressed dealmaking.

The bank's trading unit also boosted revenue, while its division providing treasury and securities services to corporations brought in 12% more revenue.

Revenue from fixed income trading grew 14% to $3.6 billion, which more than offset a 3% drop in equities trading revenue.

Citi's overall revenue climbed 9% to $20.1 billion.

The third largest U.S. lender set aside more money to cover potential bad loans, even though delinquency levels were still low compared to historical levels.

Citi's total provision for the credit portfolio rose to $17.6 billion from $16.3 billion a year ago.

At the same time, lenders have benefited from the Federal Reserve's campaign to quell inflation, which has increased borrowing costs and helped banks earn more from customer interest payments.

Revenue for the personal banking and wealth management division jumped 10% to $6.8 billion. Deposits at the end of the third quarter came in at $1.3 trillion, down 3% from a year ago as customers moved to high-yielding assets.

Fraser announced a sweeping reorganization last month that will disband ICG and give her more direct oversight over the company's businesses. The new structure is not yet reflected in the third-quarter results.

"We announced consequential changes that align our organizational structure with our strategy and changes how we run the bank," CEO Jane Fraser said in a statement.

"When completed, we will have a simpler firm that can operate faster, better serve our clients and unlock value."

Citi has not yet announced the expected headcount reduction and savings with the reorganization that will reduce management layers and prompt layoffs across its businesses. Fraser has said there was "no room for bystanders" as the bank embarked on its biggest overhaul in almost two decades. The changes are being rolled out at a time of economic uncertainty that has weighed on some of Citi's key businesses like trading.

Expenses rose 6% to $13.5 billion due to rising costs and investments in control systems. The expenses included severance payments for employees who were laid off during the sale of its international businesses.

Rivals Wells Fargo and JPMorgan Chase also reported higher quarterly profit on Friday, boosted by a rise interest payments.

(Reporting by Manya Saini in Bengaluru and Tatiana Bautzer in New York; Editing by Lananh Nguyen and Arun Koyyur)