Citigroup (C) said strong trading in the fourth quarter helped boost profit by 7%, as the U.S. presidential elections and the Federal Reserve's first interest-rate increase of the year spurred an increase in bond transactions.
Net income was $3.57 billion, or $1.14 a share, up from $3.34 billion, or $1.03, a year earlier, according to a statement Wednesday. The results slightly exceeded analysts' estimates for the quarter of $1.12 a share.
"We had a strong finish to 2016, bringing momentum into this year," CEO Michael Corbat said in the statement.
Citigroup, like Wall Street rivals JPMorgan Chase (JPM) and Goldman Sachs (GS) , reaped a windfall from trading during the quarter as stock markets rallied and bond yields surged following Donald Trump's unexpected victory in the U.S. presidential race in November.
Investors scrambled to readjust their portfolios, given Trump's pledges to cut taxes and boost infrastructure spending to stimulate the economy, which have fueled expectations of higher inflation.
Markets revenue, which includes Citi's bond- and stock-trading units, climbed 24% to $4.06 billion, according to the bank.
The results reflected "increased client activity and improved trading conditions in spread products and rates and currencies," according to the statement.
Goldman Sachs said Wednesday that its markets revenue climbed 25% in the fourth quarter. At JPMorgan, the trading gain was 32%. Morgan Stanley (MS) , another big Wall Street firm, reported a 49% surge in the business, while Bank of America (BAC) reported a 15% increase.
Citigroup said it would retire its Citi Holdings division, created after the financial crisis eight years ago to hold more than $800 billion of assets targeted for disposal, as a standalone reporting entity.
The declaration marks a symbolic milestone for Corbat, who has been working to restore the bank to profitability metrics that have lagged versus peers. At $54 billion as of the end of the year, Citi Holdings assets represent just 3% of the company's overall balance sheet.
For all of 2016, Citigroup's net income fell by 14%, reflecting the abysmal start to the year when markets swooned on investor concerns about a potential Chinese currency devaluation and the possibility of a spate of oil-industry bankruptcies.
According to the brokerage firm Keefe, Bruyette & Woods, a big disappointment from Citigroup's earnings report was a drop in the net interest margin -- the difference in rates that a bank charges on loans versus what it pays on deposits and other funds -- to 2.79% from 2.86% in the third quarter and 2.92% a year earlier. Total operating revenue was $17 billion, below analyst Brian Kleinhanzl's $17.4 billion estimate.
During the call with reporters, Gerspach said that about 0.02 to 0.03 percentage point of the decline in net interest margin was due to interest rates on loans and securities held in the firm's trading book, which are "difficult to forecast."
He said the bank also had a higher overall cost of funds because of the issuance of "total loss-absorbing capacity" debt -- instruments that could be converted into equity in the event of a capital shortfall. Such debt carries higher interest expenses because of the added risk to bondholders.