Citigroup exceeds earnings expectations for the fourth quarter

Revenue fell 10% to $ 16.5 billion, below the $ 16.72 billion expected by analysts.

Throughout 2020 – a year of economic upheaval – the profits of the country’s third largest bank in terms of assets fell 41% to $ 11.37 billion, and revenues were flat at 74, $ 3 billion. Like its big counterparts, Citigroup has benefited from good results from its operations on Wall Street, but this was offset by the billions of dollars it had to allocate to potentially bad loans.

As a sign that its economic outlook has improved, Citigroup drew $ 1.5 billion from reserves it had set aside for future loan losses, a major reason the bank’s profits were better than planned.

This will be the last day of results for CEO Michael Corbat, who will retire in February after the bank completes its 2020 financials. He will be succeeded by President Jane Fraser, who has led various divisions since joining Citigroup. in 2004 and who recently headed the consumer bank.

Ms Fraser told analysts she was taking a close look at the bank’s strategy and exploring ways to simplify it further and improve returns, which have lagged behind peers and drawn criticism from Wall Street.

“All of this with the aim of generating the desired returns for our investors,” she said. “You can hold me accountable for doing this, along with the management team. We’re a team on a mission to make it happen. And we will get there. “

Citigroup shares fell 23% in 2020, underperforming the 16% increase in the S&P 500 and the KBW Nasdaq Bank index, which fell 14%. But in the first two weeks of 2021, bank stocks rose in hopes of an economic recovery boosted by vaccines and potentially more government stimulus. Citigroup shares are up 12% this new year.

The bank’s shares fell 5.7% to $ 65.08 on Friday afternoon.

Citigroup stock is expected to receive a boost when the bank restarts share buybacks. The Federal Reserve had blocked such buybacks for all major banks in the pandemic, but said last month that banks could restart this quarter, with limits. CFO Mark Mason told reporters Citigroup could repurchase up to $ 1.8 billion in shares in the first quarter under Fed rules, but the board has yet to complete repurchase plans.

For the quarter, profits for the institutional client group, which includes trading and investment banking services, rose 27% to $ 3.65 billion, while revenues edged down to 9 , $ 28 billion.

Trading revenues increased 14%, while income from investment banks fell 5%.

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

Fourth-quarter consumer banking 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 increased 12% from the third quarter. It was the highest level of the year, showing a continued return from consumers.

Citigroup said operating expenses rose 2% to $ 10.71 billion, a line investors are watching closely. In the fall, regulators slapped Citigroup by ordering it to rebuild its extensive internal risk management systems, a project that is expected to take several years at a significant cost. Mr Mason said spending will increase by about 2% in 2021. He rebuffed an analyst’s characterization of the bank’s costs as inflated, saying these are investments that will yield returns in the future.

Citigroup said its tangible common stock return, a closely watched measure of profitability that judges its effectiveness, jumped to 11.4% in the fourth quarter from 7.6% in the third quarter. That’s more than what analysts expected in any quarter over the next two years.

Mr Corbat said he was leaving Citigroup better than he had found him. When he became CEO in 2012, the bank was struggling to recover from its near collapse during the financial crisis.

“This year’s financial results are not what I would have liked them to be for my final year as CEO,” said Corbat. But, he added, “I am proud of the fact that we have shown that we can get through a crisis and come out even stronger. Unlike the events of over a decade ago. “

Write to David Benoit at [email protected]