By David Benoit 

Citigroup Inc. on Friday said its fourth-quarter income fell 7% and it drew down some of the reserves it set aside to cover potentially soured loans.

The New York bank said profit fell to $4.63 billion, or $2.08 per share, compared with $4.98 billion, or $2.15 per share, a year earlier. Still, that beat the $1.34 expected by analysts polled by FactSet.

Revenue fell 10% to $16.5 billion, falling short of the $16.72 billion analysts expected.

For all of 2020, a year of upheaval in the economy, profit at the nation's third-biggest bank by assets fell 41% to $11.37 billion and revenue was flat at $74.3 billion. Like its big bank peers, Citigroup enjoyed strong results from its Wall Street operations, but that was offset by the billions of dollars the bank had to put aside for potentially bad loans.

In a sign its outlook on the economy has improved, Citigroup drew down $1.5 billion of the reserves the bank had put aside for future loan losses, a big reason the bank's profit was better than expected.

It will be the last earnings day for Chief Executive Michael Corbat, who is retiring in February after the bank finalizes its 2020 financial statements. He will be succeeded by bank president Jane Fraser, who has led various divisions since joining Citigroup in 2004 and recently ran the consumer bank.

Shares of Citigroup fell 23% in 2020, underperforming the S&P 500's 16% increase and the KBW Nasdaq Bank Index, which fell 14%. But in the first two weeks of 2021, bank stocks have been lifted by hopes of an economic recovery spurred by vaccines and potentially more government stimulus. Citigroup shares are up 12% in the new year.

For the quarter, profit in the institutional clients group, which includes trading and investment banking, rose 27% to $3.65 billion, while revenue fell slightly to $9.28 billion.

Trading revenue rose 14%, while investment banking revenue fell 5%.

Still, those businesses had some of their best quarters in history this year and drove the institutional group to its record $44.3 billion in total 2020 revenue.

The consumer bank's fourth-quarter profit fell 17% to $1.3 billion, and revenue fell 14% to $7.31 billion.

Spending on Citigroup credit cards fell 7% from a year ago but rose 12% compared with the third quarter. It was the highest level of the year, showing a continued consumer comeback.

Citigroup said operating expenses rose 2% to $10.71 billion, a line investors are watching closely. Regulators in the fall slapped Citigroup with an order to rebuild its vast internal risk systems, a project that's expected to take several years at significant cost.

Citigroup said its return on tangible common equity, a closely watched measure of its profitability that judges how efficient it is, jumped to 11.4% in the fourth quarter from 7.6% in the third quarter. That's higher than analysts expected it to get in any quarter over the next two years.

Write to David Benoit at david.benoit@wsj.com

 

(END) Dow Jones Newswires

January 15, 2021 09:24 ET (14:24 GMT)

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