Citigroup (NYSE: C) shares surged Friday, lifting financial sector-related exchange traded funds after the bank posted second-quarter results that beat expectations in profits and revenue.
On Friday, the Invesco KBW Bank ETF (KBWB) increased by 3.8% and the First Trust Nasdaq Bank ETF (FTXO) advanced by 4.2%. The broader and more widely observed Financial Select Sector SPDR (XLF) gained 2.6%.
Meanwhile, Citigroup shares jumped 13.3% on Friday. C makes up 8.1% of KBWB’s underlying portfolio, 4.0% of FTXO, and 2.6% of XLF.
“In a challenging macro and geopolitical environment, our team delivered solid results and we are in a strong position to weather uncertain times, given our liquidity, credit quality, and reserve levels,” Citigroup CEO Jane Fraser said in a press release.
While Citigroup revealed profit declined 27% to $4.55 billion, or $2.19 per share, year-over-year, the bank stated that earnings exceeded expectations for the quarter despite analysts slashing estimates for the industry in recent weeks, CNBC reported.
Revenue also came in at a bigger-than-expected 11% for the quarter to $19.64 billion, or more than $1 billion over estimates, as the bank generated interest income and saw strong results in its trading division and institutional services business.
“The results we saw from Citi today show that the turnaround plan is on track. Trading and interest income offset the industry-wide weakness in investment banking,” Thomas Hayes, chairman and managing member at Great Hill Capital LLC, said in a note, according to Reuters. “This is the cheapest large… bank with the highest upside potential.”
Citigroup’s results surprised markets after bank stocks have been pummeled this year on growing concerns that the U.S. is heading toward a recession, which would lead to increased loan losses. While Citigroup is also faced with a decline in investment banking revenue, the company received a boost in trading in the quarter.
“Citigroup appears to be one of the highlights of the bank earnings season so far,” David Wagner, a portfolio manager at Aptus Capital Advisors, told Reuters, adding that the treasury and trade solutions business was “firing on all cylinders, insulating all of the losses from the investment banking segment.”
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