Despite Citigroup's earnings surpassing expectations, its stock price decreases due to the bank's decision to increase loan loss reserves.

• Wall Street expectations were surpassed by Citigroup in their third-quarter results, which showed growth in investment banking and wealth management.
• However, the bank set aside more money to offset potential loan losses.
• Citi's banking division experienced a 18% increase in revenue year over year, with its investment banking arm contributing to a 31% gain in wealth revenue.

The bank reported third-quarter results that exceeded Wall Street expectations, driven by growth in investment banking and wealth management. Despite this, the bank allocated more funds to mitigate potential loan losses.

The bank's shares, previously trading higher before the market opened, experienced a 4.8% decline.

What Wall Street analysts surveyed by LSEG expected compared to what the company reported.

• Earnings per share: $1.51 vs. $1.31 expected
• Revenue: $20.32 billion vs. $19.84 billion expected

In the most recent quarter, net income decreased to $3.2 billion, or $1.51 per share, from $3.5 billion, or $1.63 per share, in the previous year. This decline was due to an increase in the cost of credit, including a net addition of $315 million in Citi's provision for credit losses.

On an analyst call on Tuesday, Mark Mason, the Chief Financial Officer, stated that the bank has observed a "stabilization" in loan delinquency among its retail services clients and is "well reserved" in that area.

The increase in revenue from $20.14 billion to $20.32 billion was due to a 1% rise, with banking revenue contributing to the growth, particularly its investment banking arm which experienced a 31% gain. Additionally, wealth revenue saw a 9% increase.

Fixed income revenue decreased by 6% year over year, while equity markets revenue increased by 32%.

Since March 2021, Citigroup CEO Jane Fraser has been concentrating on streamlining the bank by cutting its international operations and letting go of employees.

"Data quality management is an area where we have increased our investments. We have also closed another longstanding consent order related to the effectiveness of our anti-money laundering systems. Our transformation remains our top priority," Fraser stated during the call.

Fraser continued, "The management team and I remained steadfast and determined to ensure the successful completion of this transformation."

Citi's net interest income decreased by 3% year over year to $13.4 billion, with the margin shrinking. The company's net interest income, excluding the markets business, was $11.96 billion, which also declined from the previous year. Citi expects the nonmarkets metric to be roughly the same in the fourth quarter as in the current period. However, the company did not provide net interest income guidance for 2025.

Citigroup reduced expenses by 2% annually and anticipates full-year expenses to align with guidance of $53.5 billion to $53.8 billion, excluding regulatory expenses.

Through Monday, Citigroup's shares had risen more than 28% year to date, surpassing both the S&P 500 and the financial sector.

Major banks that have reported third-quarter earnings results have exceeded expectations, including Goldman Sachs and JPMorgan Chase.