Citigroup Reports Higher Earnings, Lower Revenue -- 2nd Update
January 18 2017 - 9:26AM
Dow Jones News
By Christina Rexrode and Telis Demos
Citigroup Inc. said Wednesday that its fourth-quarter profit
rose 7%, the latest bank to benefit from volatile political events
that boosted trading. The bank also cut expenses, and borrower
quality improved.
Citigroup beat analysts' expectations on quarterly profit but
missed on revenue.
Quarterly profit at the New York-based bank was $3.57 billion,
up from $3.34 billion a year earlier. Per-share earnings were
$1.14, better than the $1.12 expected by analysts.
Revenue however fell 8% to $17.01 billion, missing analysts'
expectations of $17.3 billion. However, the decline came from a
drop at Citi Holdings, the unit where the bank stores assets it is
in the process of selling or winding down.
Citigroup Chief Executive Michael Corbat, in a statement, said
Citigroup "had a strong finish to 2016, bringing momentum into this
year."
Last year marked a period when Citigroup was able to stay under
the radar, especially as Wells Fargo & Co.'s sales scandal
absorbed headlines for the last four months of the year. Citigroup,
meanwhile, passed the Federal Reserve's stress test and tripled its
dividend, and it was the only bank to pass regulators' living wills
exam on the first try.
But Mr. Corbat now needs to pivot to showing investors that the
bank can continue to improve shareholder returns, something that
company executives have talked about openly over the past year. The
company's return on equity, a closely watched profitability metric,
rose to 6.2% from 5.9% in the year-ago quarter, but Citigroup's ROE
trailed the other five big U.S. banks, which posted returns between
7% and 11% for the fourth quarter.
And Mr. Corbat, more than other bank CEOs, may need to grapple
with what the new presidential administration might mean for his
company. Citigroup's shares have rallied since Mr. Trump's
election, largely on the assumption that the new president will
dismantle banking regulations. But the protectionist tone of Mr.
Trump's campaign also has raised concerns about Citigroup's
business model, where a key strategy is moving money around the
world for governments and global businesses. Citigroup has defended
its business strategy, including its investment in Mexico.
Citigroup's shares have jumped 17% since the election, compared
with 20% in the KBW Nasdaq bank index. In premarket trading
Wednesday, Citigroup's shares slid 0.3% to $58.19.
But the incoming Trump administration has been good for trading,
as the uncertainty caused by his election has been a boon for
trading desks, including Citigroup's. Fourth-quarter trading
revenue, excluding an accounting adjustment, rose 31% to $3.7
billion from $2.82 billion a year earlier. That was significantly
better than what Chief Financial Officer John Gerspach predicted
last month, when he said he expected trading revenue to be up by
nearly 20% from a year ago. The numbers also followed strong
trading results at rivals, including J.P. Morgan Chase & Co.'s
increase of 24%, and Bank of America Corp.'s gain of 11%.
Citigroup's trading results were driven by a 36% increase in its
larger fixed-income trading unit, followed by a 15% increase in its
smaller equities-trading unit. Investment banking revenue was
flat.
The bank set aside reserves for bad loans at a much smaller pace
than a year ago, when low oil prices raised concerns about defaults
among the banks' energy-related clients.
Quarterly revenue at the consumer bank rose just 2%, with a 10%
drop in Latin America, where the bank has been shrinking its
consumer business.
Revenue increased 15% in branded credit cards in North America,
a unit where the bank has been investing in its Costco Wholesale
Corp. partnership.
Quarterly expenses fell 9%. The bank cut about 5% of its
workforce, to 219,000 from 231,000.
Write to Christina Rexrode at christina.rexrode@wsj.com and
Telis Demos at telis.demos@wsj.com
(END) Dow Jones Newswires
January 18, 2017 09:11 ET (14:11 GMT)
Copyright (c) 2017 Dow Jones & Company, Inc.
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