US Stock Market: Citigroup shares slide after upbeat results fail to ease worries over higher costs

Citigroup reported better-than-expected second-quarter earnings, driven by a surge in trading and investment banking revenues, but its shares fell more than 4% as investors focused on the prospect of higher expenses in the second half of the year, as per a Reuters report.

The bank posted its highest quarterly revenue in a decade, with net income jumping 45% to $5.8 billion, or $3.15 per share, comfortably ahead of analysts' estimates of $2.74 per share, according to LSEG data. Revenue rose 14% year-on-year to $24.8 billion, also surpassing Wall Street expectations.

Despite the strong performance, investors were unsettled after Citigroup maintained its full-year return on tangible common equity (ROTCE) target of 10% to 11%, even though it achieved a 13% ROTCE in the second quarter. According to Reuters, analysts questioned whether the guidance signalled weaker profitability in the second half as the bank ramps up investments.


Chief Executive Jane Fraser said the bank is evaluating whether to accelerate some medium-term investments but indicated there are no plans for major acquisitions. Executives also fielded several questions about the bank's expense outlook during the earnings call.

Citigroup's results were powered by strong trading activity amid volatile global markets. Geopolitical tensions, including the U.S.-Iran conflict, fuelled market swings that encouraged clients to reposition portfolios, boosting trading volumes across Wall Street.

Equities trading revenue surged 45% from a year earlier, while fixed-income revenue rose 7%. Within fixed income, rates and currencies trading increased 1%, while commodities and other fixed-income businesses posted a 25% gain.

Investment banking also delivered a robust performance, with revenue climbing 44% to $1.55 billion. Total banking revenue rose 34% to $1.92 billion despite a decline in corporate lending income.

Easing regulatory expectations under the Trump administration and growing demand for artificial intelligence-related assets have supported global dealmaking this year. Global mergers and acquisitions have crossed $3 trillion so far in 2026, with Citigroup advising on transactions worth more than $300 billion, according to Dealogic data.

The bank participated as an underwriter in SpaceX's $75 billion initial public offering during the quarter and advised on the $44.8 billion combination of Unilever and McCormick's food businesses.

Chief Financial Officer Gonzalo Luchetti told reporters that clients increasingly turned to equity and debt capital markets during the quarter, while the escalation of tensions in the Middle East has not yet disrupted the bank's deal pipeline, according to Reuters.

The results extend a broader trend across major U.S. banks, with JPMorgan Chase, Goldman Sachs, Wells Fargo and Bank of America also reporting strong quarterly profits, helped by buoyant trading and investment banking activity.

Fraser's restructuring efforts remained in focus as the lender continues to simplify its organisational structure, sell international consumer businesses and strengthen risk controls following regulatory actions imposed in 2020. The strategy has helped narrow the bank's valuation gap with peers in recent quarters.

Citigroup also recorded a 13% increase in net interest income, reflecting resilience in its lending business despite elevated borrowing costs.

Its U.S. consumer business continued to show strength, with the cards division reporting a 1% rise in revenue and a 12% increase in net income to $852 million.

The bank's wealth management division, a strategic growth area aimed at generating more stable fee-based income, posted revenue of $3.18 billion, up 13% from a year earlier as stronger financial markets lifted client asset values. The business generated a 14.4% return on tangible common equity, although it remains below levels reported by some larger Wall Street rivals.