Citigroup Inc. turned in lower profit and revenue for the second quarter versus a year earlier. But for a bank that is still considered a work in progress, it was good enough for many investors.
The bank on Friday said earnings fell 17% from a year ago, and revenue was down 10%. The results were better than analysts had predicted and topped what Chief Executive Michael Corbat had forecast just six weeks ago, driven by a Brexit-related mini-trading boom, growth in Mexico and an improving credit profile for customers.
Bank executives played down the effects of the June 23 U.K. vote to leave the European Union, which investors had feared might overwhelm even U.S. banks.
"We're not looking at this U.K. referendum outcome as being some signaling of another financial crisis," Chief Financial Officer John Gerspach said, echoing the sentiment of executives at J.P. Morgan Chase & Co., which reported earnings Thursday.
Still, the Brexit vote killed the banks' hopes the Federal Reserve might raise U.S. interest rates this year, and the superlow rates continue to pressure bank earnings. Mr. Corbat said the global environment "remains challenging," citing the change in power in the U.K. and the "unique presidential campaign" in the U.S.
"Such geopolitical and economic uncertainty doesn't create a clear picture of potential interest-rate increases," Mr. Corbat said.
Citigroup posted second-quarter profit of $ 4 billion, down from $ 4.85 billion a year ago. Earnings on a per-share basis were $ 1.24. That beat the $ 1.10 expected by analysts polled by Thomson Reuters, though those estimates had been falling since the start of the year and declined further in the wake of the Brexit vote.
Citigroup's revenue slightly beat expectations, at $ 17.55 billion versus analyst estimates of $ 17.47 billion. Still, it was the second consecutive quarter with a year-over-year decline.
That said, the past year and a half has been relatively calm for Citigroup, which for years was beset by legal fees and regulatory stumbles. Now, Citigroup has to show that it can turn in steady earnings and boost revenue to improve returns for beleaguered shareholders.
Those remain subpar. The bank's return on equity in the second quarter was 7%, below its theoretical 10% cost of capital. In the past five years, Citigroup has failed to surpass that threshold in even a single quarter. Mr. Gerspach said on a call with reporters that the bank recognizes it needs to boost this, but that "the trendline is clearly there to get to where we know we need to get to."
Citigroup executives expressed confidence in their overall strategy, which includes doing business around the world and focusing the consumer bank on wealthier customers in big cities. "I think globalization is still something that is going to be with us for a while," Mr. Gerspach said.
Analysts reacted positively to the results. Evercore ISI analyst Glenn Schorr said Citigroup's better-than-expected earnings were helped by loan growth, good credit quality and tame expenses, and said profitability metrics should move higher.
In trading and investment banking, Citigroup's results had some similarities with J.P. Morgan's, including a jump in the unit that trades bonds and currencies and a decline in investment banking.
Trading revenue, excluding an accounting adjustment, rose 15% to $ 4.26 billion from $ 3.7 billion a year ago. Citigroup's revenue from trading bonds, currencies and commodities rose 14%. Revenue from the smaller equities-trading unit was also up.
Mr. Gerspach said the bank had been "well positioned" to help clients dealing with the Brexit fallout. He also expressed optimism about trading in recent weeks. "Markets are open, markets are active, we're having great engagement with our clients," Mr. Gerspach said.
J.P. Morgan's better-than-expected results fueled a rise in bank stocks Thursday, but it didn't last long. On Friday, all the big-bank stocks were down, led by a drop of nearly 3% at Wells Fargo & Co., which reported results that disappointed investors.
Write to Christina Rexrode at christina.rexrode@wsj.com
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