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Citigroup’s fourth-quarter profit declines by 21% as bank sets aside extra money for credit losses

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Citigroup said fourth-quarter net income decreased by greater than 21% from a yr ago because the bank put aside extra money for potential credit losses.

Shares rose 1.7% as investors looked to some positives within the report including a record fourth quarter for fixed income trading.

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Listed below are the fourth-quarter numbers versus what Wall Street expected:

  • Net income: $2.5 billion versus $3.2 billion a yr ago.
  • Earnings: $1.10 a share, excluding certain divestitures. (It was not clear if that was comparable to the $1.14 a share estimate from analysts.)
  • Revenue: $18.01 billion in revenues, above the $17.9 billion expected from analysts polled by Refinitiv.
  • Net Interest Income: $13.27 billion, above the 12.7 billion expected by analysts, in keeping with StreetAccount
  • Trading Revenue: Fixed Income $3.16 billion, above expectations. Equities trading was $789 million, below expectations.
  • Provision for credit losses: $1.85 billion in comparison with $1.79 billion expected by analysts polled by StreetAccount.

CEO Jane Fraser’s turnaround efforts at Citigroup have hit a snag amid concerns over a world economic slowdown and as central banks all over the world battle inflation. Like the remaining of the industry, Citigroup can also be contending with a pointy decline in investment banking revenue, partly offset by an expected boost to trading ends in the quarter.

Citigroup’s net income slumped 21% to $2.5 billion from $3.2 billion within the previous yr, largely as a consequence of slowing loan growth in its private bank alongside expectations for a weaker macroeconomic environment going forward. The weakness was partially offset by higher revenues and lower expenses.

The bank said it put aside extra money for credit losses going forward, increasing provisions 35% from the previous quarter to $1.85 billion. This construct included $640 million for unfunded commitments as a consequence of loan growth within the private bank.

Revenues in services and markets divisions increased 32% and 18% respectively, driven by growth in interest income and in fixed income markets. The fixed income markets division saw revenues jump 31% to $3.2 billion, the best fourth-quarter results ever, as a consequence of strength in rates and currencies.

“With their revenues up 32%, Services delivered one other excellent quarter, and we’ve gained significant share in each Treasury and Trade Solutions and Securities Services,” Fraser said in a press release. “Markets had the perfect fourth quarter in recent memory, driven by a 31% increase in Fixed Income, while Banking and Wealth Management were impacted by the identical market conditions they faced all year long.”

There was also strength in banking, with private bank revenues gaining 5% and U.S. personal bank revenues up 10%. Retail banking revenues, nonetheless, fell 3% as a consequence of lower mortgage volumes.

JPMorgan, Bank of America and Wells Fargo also reported earnings on Friday. JPMorgan topped analyst estimates for the quarter and said that it now sees a gentle recession as the bottom case for 2023. Bank of America also beat Wall Street’s expectations as higher rates of interest offset losses in investment banking.

Wells Fargo shares fell, nonetheless, after the bank reported that profits fell in the newest quarter as a consequence of a recent settlement and the bank’s boosted reserves amid economic weakness.

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