Big jump in profits at US bank good indicator for UK economy
Published 16/07/2013 | 01:30
The third largest bank in the US, which has a base in Belfast's Titanic quarter, has become the latest lender to shake of the last remnants of the credit crunch after posting a stellar set of results.
Citigroup, which employs around 1,200 people on the Sydenham Road, made $4.2bn (£2.8bn) in the three months to the end of June, a massive 42% higher than the same period last year.
A $477m (£316m) boost from an adjustment in valuation helped the figures significantly, but even allowing for that the lender still saw its profits jump an impressive 26%.
The health of the US economy, and its banks in particular, is often seen as a leading indicator of how the UK economy will perform in the near future so the performance will gladden the hearts of economists, particularly as its results comes hot on the heels of similar profits for JP Morgan and Wells Fargo late last week.
Incumbent banks in Northern Ireland will also warm to the news as part of Citigroup's success has come from a drop in impairment charges – money set aside to protect against debts, mostly against property, it believes are unlikely to be repaid – something which has made profit a difficult goal to achieve for lenders here.
Most of these relate to the US property market but signs of a pick up there should bode well for Northern Ireland's stuttering housing sector.
But the part of Citigroup's business which performed best in the last three months is perhaps indicative of how far the global economy has come since the risk averse days of the last few years.
It's investment banking arm saw profits jump 63%, good news for the Belfast office which handles a lot of the so-called back office functions of the division, matching trades for both the US and Europe.
And a drive by the bank to target less developed banking geographies appears to have paid off.
It saw revenue climb in Latin America and Asia, despite recent concerns over the robustness of the Chinese economy. The bank has also been striving to trim its business of divisions it doesn't believe are part of a longer-term strategy and managed to strip £18bn worth of assets from its balance sheet during the quarter.
The banks operating expenses remain a focus, particularly after Citigroup's chief executive said last year a cut of 11,000 to its headcount was one way of keeping costs down.
That's unlikely to worry the Northern Ireland office, one which was set up to save the bank money, and could in fact make the Titanic base a more important part of the business.