Citi Beats Expectations on Backs of Depositors

Citibank reported earnings today that beat pretty low expectations. The most interesting thing about the story from my perspective was that it did so by paying less for deposits. Here's what Bloomberg had to say:

"Citigroup's Tier 1 capital ratio, a measure regulators use to monitor a bank's ability to withstand loan losses, rose to 8.7 percent at the end of the quarter from 7.7 percent in the first quarter and 7.1 percent at the end of 2007. The minimum for a ``well-capitalized'' rating from U.S. regulators is 6 percent. Citigroup sets its own target at 7.5 percent, partly to assure its AA- rating from Standard & Poor's.

Seven interest-rate cuts by the Federal Reserve in the past year have reduced the bank's borrowing costs and allowed it to trim the rates it pays depositors."

Of course this isn't limited to Citi, all banks have benefited greatly by the reduction in rates. They've cut the rate they pay on deposits while at the same time keeping mortgage and credit card rates the same. This gap is profit in the bank.

Of couse, this is one reason why Bernanke cut rates. As a depositor you've alread helped to keep these banks afloat. Since you're doing this, you might as well make sure you are getting the best rate for your money.