C Citigroup Inc

By Telis Demos 

Citigroup Inc. bounced back from a year-earlier loss, but its vital trading business struggled under tough market conditions in the fourth quarter.

The bank's net income was $4.3 billion in the latest quarter, versus a loss of $18.9 billion a year earlier, when it took a large one-time charge related to the 2017 corporate tax cut.

But overall revenue at the bank was $17.1 billion, down 2% from a year ago. That decline was led by a 14% drop in the trading business, where revenue fell to $2.6 billion.

December's volatility was especially tough for banks' trading desks. Many of their clients stepped back from the market and low-cost algorithms took over. Fixed-income trading, normally a stalwart for Citigroup, was off by 21% from a year earlier.

The performance could herald weakness across banks' trading desks, especially peers JPMorgan Chase & Co., which reports earnings Tuesday, and Bank of America Corp., which reports on Wednesday.

Goldman Sachs Group Inc. and Morgan Stanley, which also report this week, rely more heavily on equity trading but could also feel the effects of the market gyrations. Citigroup's equity-trading revenue rose 18% from a year ago, to $668 million, though that was bolstered by removing a one-time loss from the fourth quarter of 2017.

A 4% cut in expenses, to $9.9 billion, plus a net improvement to its credit risk and overall lower tax rates boosted the bank's core profitability.

Taking out the tax write-off from a year ago, and removing a small one-time tax-related gain in the fourth quarter, net income grew 14% from a year ago, to $4.2 billion.

Adjusted earnings per share were $1.61. Analysts polled by Refinitiv expected $1.55 a share.

The 2017 charges related to a decline in the value of deferred tax assets the bank accumulated during the financial crisis due to the tax-law changes.

"The real economy is doing well," said Citigroup Chief Financial Officer John Gerspach in a call with reporters. "Then you've got what I'll call the financial economy...I think there's a good deal of concern around the world as to how do we exit this period of quantitative easing," he said, referring to the Federal Reserve's move to raise rates and reduce the availability of easy credit.

"What remains to be seen is whether the financial economy has an impact on the real economy in 2019," he added.

Citigroup shares were down 1.1% in premarket trading.

Investor concern about the impact of slowing global growth on the New York bank's vast international business has weighed on Citigroup's stock in recent months. Its shares have fallen 26% over the past 12 months, while the broader KBW Nasdaq Bank Index is down about 20%.

Total global revenue from Asia was down 5% from a year ago, to $3.5 billion. Consumer banking in Asia was off by 4%, and institutional revenue was off by 5%.

That is the bank's second-biggest region behind North America, where revenue was also down, by 2%, to $8.1 billion.

One continued strength was the bank's treasury and trade services unit, which serves multinational corporations around the world. Revenue in that unit was up 7% to $2.4 billion despite worries about trade conflicts.

The U.S. consumer's enduring stability was another positive. Revenue in the bank's credit-card business was up 1% from a year ago, to $5.1 billion.

The bank's core profitability ratio, return on equity, fell from the third quarter, to 9.0% from 9.6%. That still lags behind most of its peers, but the ratio has been trending higher in recent quarters, as the bank has returned capital to shareholders, including a $5.8 billion payout in the fourth quarter.

Write to Telis Demos at telis.demos@wsj.com

(END) Dow Jones Newswires

January 14, 2019 09:44 ET (14:44 GMT)

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