First Quarter Earnings and Market Volatility Impact
Citigroup reported a 21% increase in net income for the first quarter, reaching $4.1 billion, or $1.96 per share, surpassing Wall Street estimates. The bank’s strong performance was driven by a 23% jump in stock trading revenue, as clients adjusted portfolios amid heightened market uncertainty fueled by U.S. President Donald Trump’s tariffs and the rise of new technologies, such as DeepSeek’s AI model.
Concerns Over Tariffs and Economic Outlook
Despite strong earnings, Citigroup’s CEO Jane Fraser expressed concerns about the potential fallout from ongoing tariff policies, which have clouded the economic outlook. She highlighted the uncertainty around trade policies, including tariffs, and how they might reignite inflation and dampen economic growth. Fraser noted that many clients are pausing plans, reflecting a slowdown in activity as companies grow more cautious in the current climate.
Impact of Rising Tariffs on Investment Banking
Citigroup’s investment banking revenue increased by 12%, primarily driven by mergers and acquisitions advisory services. However, Fraser acknowledged that the economic uncertainty caused by the tariffs is leading to reduced activity in the second quarter. CEOs across Wall Street have voiced similar concerns about the tariffs’ impact on recession fears and the broader market.
Provisions for Loan Losses and Buybacks
The bank increased its provisions for loan losses, anticipating potential economic slowdowns. However, delinquencies are still within expected limits. Citigroup also continued its share buyback program, repurchasing $1.75 billion in shares during the first quarter, with plans for similar volumes in the second quarter.
Regulatory Progress and Compliance Challenges
Citigroup is actively working to comply with regulatory orders that have been in place since 2020. Despite progress, Chief Financial Officer Mark Mason noted that some issues, particularly related to data integrity, take longer to resolve. In light of regulatory challenges, the bank plans to increase spending on compliance initiatives, including hiring additional IT employees to reduce reliance on contractors.
IPO Plans for Banamex and Future Prospects
Fraser also mentioned that Citigroup is on track for an IPO of its Mexican unit, Banamex, by the end of 2025, though market conditions and regulatory factors may push the timeline into 2026. Citigroup continues to navigate a complex landscape of market volatility, regulatory pressures, and shifting trade policies.
