Citigroup earnings, revenue top expectations

Victor J. Blue | Bloomberg | Getty Images

Citigroup reported a stronger-than-expected 26 percent rise in adjusted quarterly profit as stronger home prices reduced losses on mortgages and trading revenue rebounded.

Adjusted net income rose to $3.89 billion, or $1.25 per share, in the second quarter, from $3.08 billion, or $1.00 per share, a year earlier, the third-largest U.S. bank by assets said on Monday.

The adjusted results excluded the positive impact of changes in the value of the company's debt.

After the earnings announcement, the company's shares rose in pre-market trading. (Click here to track the company's shares in pre-market trade.)

Analysts on average had expected earnings of $1.17 per share, excluding some items, according to Thomson Reuters I/B/E/S.

(Read more: JPMorgan slays 'Whale' as profit beats)Citigroup shares were up 1.9 percent at $51.69 before the bell.

Revenue from fixed income markets rose 18 percent to $3.37 billion, while equity market revenue rose 68 percent to $942 million.

Trading revenue in the year-earlier quarter was weak across the industry as a slowdown in the business coincided with the stunning revelation by JPMorgan Chase that it had lost billions of dollars on derivatives.

Citigroup's net credit losses declined to $2.61 billion from $3.49 billion as higher house prices lifted the value of the home mortgage assets the company has held since the financial crisis.

Earnings were also boosted by the company's drawdown of $784 million of reserves that it had taken earlier against loan losses that have not materialized. The draw follows a reserve release of $1.01 billion in the year-earlier quarter.

Citi's shares had risen about 28 percent this year up to Friday's close, slightly better than the KBW index of bank stocks. They have doubled in value in the past year.

The stock rose through the end of May on investor confidence in the company's restructuring and its growth potential in emerging markets. But they have faltered since early June amid signs that emerging market economies are slowing down.

Chief Executive Mike Corbat has been moving to cut costs and increase earnings since October when Citigroup's board put him in the job after ousting Vikram Pandit.

But Corbat and Chairman Michael O'Neill have said they are sticking with Pandit's strategy of positioning the company to benefit from global growth in emerging markets, urbanization and increasing digital commerce.

"Citi is a restructuring story and it is an emerging markets story," analyst Fred Cannon of Keefe, Bruyette & Woods said before the company reported results.

Citigroup is the most global of the big U.S. banks. About 58 percent of its revenue last year came from outside of North America.