01:04 PM EDT, 10/15/2024 (MT Newswires) -- Citigroup's ( C ) fee-based revenue gains helped drive a surprise increase in third-quarter revenue while the lender said it expects full-year net interest income to decline less than initially projected.

Revenue edged up to $20.32 billion for the three-month period ended Sept. 30 from $20.14 billion a year ago and surpassed the $19.82 billion average analyst estimate on Capital IQ. Excluding divestiture-related impacts, revenue rose 3%, the bank said.

"Our businesses performed well as the rate cutting cycle began with a double-digit increase in fee-based revenues, reflecting the growing diversity of our earnings mix," Chief Executive Jane Fraser told analysts on a conference call, according to a Capital IQ transcript.

Earnings per share dipped to $1.51 from $1.63 year over year amid higher cost of credit but topped the $1.31 Street view. Net interest income dropped 5% to $2.73 billion but was up 4% on a sequential basis. NII excluding markets was down 1%, reflecting lower rates in Argentina, Chief Financial Officer Mark Mason told analysts.

Banking revenue climbed 18% annually to $1.68 billion, led by a 31% jump in investment banking amid higher fees. Markets revenue ticked up 1% to $4.82 billion, buoyed by a 32% increase in equity markets. Services revenue improved 8% to $5.03 billion amid momentum in securities and treasury and trade solutions.

Wealth revenue increased 9% to $2 billion largely due to higher fees and a 6% gain in net interest income as deposit volumes gained. In US personal banking, revenue advanced 3% to $5.05 billion amid loan growth in cards and lower partner payments.

In the fourth quarter, Citigroup ( C ) expects NII excluding markets to be "roughly flat" on a sequential basis, Mason said on the call. For the full year, NII excluding markets is expected to be "slightly down," which is better than the company's prior guidance, he said. The bank is on track to meet its $80 billion to $81 billion full-year revenue guidance.

"As short-end rates continue to come down, we expect a headwind on floating rate assets, which will be somewhat offset by disciplined deposit pricing," Mason said. "We expect an ongoing NII headwind as legacy franchises loans and deposits continue to come down."

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