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Brexit helps Citi exceed prior guidance; NIM expected to expand

CFO John Gerspach saidJuly 15 that second-quarter earnings exceeded the company's previously issued guidance,in part due to increased client activity leading up to and following the U.K.'sdecision to leavethe European Union.

Citireported early July 15 second-quarteradjusted net income to common stock of $3.68 billion, or $1.24 per share, up fromnet income of $3.50 billion, or $1.10 per share, in the first quarter. Citi CEO Michael Corbat had previously saidin early June that the company's second-quarter earnings would be "" with the firstquarter.

Speakingon a conference call to discuss second-quarter earnings, Gerspach said market revenuesimproved as the company increased engagement with corporate clients during June.The finance chief said many clients sought advice on how to handle market volatilitythat preceded and followed Brexit. In the second quarter, Citi's fixed-income marketsrevenues rose to $3.47 billion, up 12% from the preceding quarter.

Gerspachfurther noted that the company benefited in the second quarter from many energyclients being able to access the markets as well as strong momentum in its retailbanking franchise in Mexico.

Citi'snet interest margin, however, contracted in the second quarter, dipping to 2.86%from 2.92% in the linked quarter and 2.95% a year earlier. Gerspach acknowledgedthat the company's margin was lower than its prior margin guidance to hold at 2.92%due to higher capital balances, lower trading margins and weaker loan yields.

Citiexpects its NIM to rebound in the second half of 2016, he said, rising to 2.90%or "slightly higher" driven by the company's acquisition of the Costco U.S. co-brand creditcard portfolio and a normalizationof average cash balances.

Still,he noted that the outlook for the company's NIM is down from its prior expectationof 2.95%, due to lower loan yields and reduced interestrate expectations.