Citigroup Inc. is collecting a windfall from tumultuous international markets, even as a dimming economic outlook and Russia’s invasion of Ukraine pose billions of dollars in risks.

The bank’s second-quarter profit soared past analysts’ estimates, driven by unexpectedly large hauls from currencies, commodities and interest-rates trading and its shuttling of corporate money over borders. Net income amounted to US$4.5 billion, trouncing the US$3.6 billion predicted by analysts.

The stock surged 13 per cent in New York, the most since March 2020. That pared this year’s price slump to 17 per cent.

The firm, drawing a larger share of revenue from overseas than any of its US peers, announced results a day after rivals JPMorgan Chase & Co. and Morgan Stanley posted profits that disappointed investors. Still, Citigroup said it, too, will suspend stock buybacks to meet higher capital requirements, a decision that was widely expected after JPMorgan announced a similar move this week based on projections in US stress tests.

“In a challenging macro and geopolitical environment, our team delivered solid results and the bank is in a very strong position to weather uncertain times,” Chief Executive Officer Jane Fraser told analysts on a conference call. “I’m confident about the path ahead.”

Total revenue rose 11 per cent to US$19.6 billion, surpassing the US$18.4 billion average analyst estimate compiled by Bloomberg.

Revenue was helped by better-than-expected results from Citigroup’s trading division, with the bank citing strong performance from fixed-income products and equity derivatives. That helped offset a 46 per cent slump in investment banking revenue as the market for initial public offerings and special purpose acquisition companies dried up amid the macroeconomic uncertainty.

Revenue from the firm’s treasury and trade solutions business, which moves US$4 trillion a day for corporate clients in 140 currencies, soared 33 per cent, helping the division notch its best quarter in a decade. Citigroup said results from the unit were helped by higher interest rates and increased deposits.

The bank set aside almost US$1.3 billion to cover souring loans as it braces for a potential economic slowdown, and it disclosed new headaches from operations in Russia, where the company has been struggling to sell its consumer and commercial banking divisions.

The firm is now considering a range of possibilities for operations in that country, it said.

RUSSIA EXPOSURE

Citigroup spent much of the quarter whittling its exposure to Russia as President Vladimir Putin pressed on with the invasion. The bank projects that it could lose US$2 billion in a severely stressed scenario, down from as much as US$3 billion previously.

Even so, the company saw the dollar value of its exposure to Russia jump to US$8.4 billion in the quarter, which the firm blamed on the appreciation of the ruble. The value of the ruble soared 50 per cent against the U.S. dollar in the period, reversing two straight quarters of declines.

Citigroup has said it will have to spend more as it revamps many of its underlying technologies and infrastructure -- a yearslong effort that the bank says will help it become more modern and satisfy a pair of consent orders that regulators saddled it with back in 2020. In all, costs for the quarter jumped 8 per cent to US$12.4 billion, slightly better than the 9.3 per cent increase analysts were expecting.

“There’s a lot more wood to chop,” Chief Financial Officer Mark Mason told analysts on a conference call. “We’re making a lot of investments in the franchise.”

The pause on stock buybacks will help the bank meet Federal Reserve demands that Citigroup boost its capital buffer to weather times of stress, based on the firm’s importance to the financial system, as well as the projected performance of its holdings in an economic downturn. 

The bank said last month that it will be required to maintain a common equity tier 1 ratio of 12 per cent starting next year, up from the 10.5 per cent regulators currently require of the bank. On Friday, Mason said the firm would seek to go even further and increase the ratio to 13 per cent by the middle of next year.