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By Ambar Warrick and Imani Moise
(Reuters) – Citigroup Inc on Friday reported a 7% drop in fourth quarter profits, beating market expectations but failing to secure Wall Street approval, rising costs and falling revenues of its general public activity which weighed on the results. Like his major US colleague JPMorgan Chase & Co, the results benefited from the release of some $ 1.5 billion of reserves he had previously set aside against bad debts related to coronaviruses.
But the lowest official interest rates meant to support the economy have weighed on its large corporations that provide credit cards and loans to American households. Shares of the bank, which were trading at a 10-month high, fell 1.6% pre-market.
Citi, which named Jane Fraser as the first female Wall Street chief executive to take over next month, had added more than $ 10 billion to its reserves last year in anticipation of more defaults.
The prospect of an increased stimulus under Joe Biden’s presidency has boosted confidence that banks will be able to weather the COVID-19 pandemic without widespread losses.
Outgoing chief executive Michael Corbat said the bank also intends to resume share buybacks in the first quarter of 2021, after receiving Federal Reserve approval in December.
Earlier this week, Citi reorganized the leadership of its US consumer bank and consolidated its wealth management units. Fraser said overhauling risk management and internal controls would be his priority.
Overall, the New York-based bank reported profit of $ 4.63 billion, or $ 2.08 per share, from $ 5 billion, or $ 2.15 per share, a year earlier. Analysts on average expected earnings of $ 1.34 per share, according to data from Refinitiv.
Total loans fell 3% to $ 676 billion at the end of the quarter, while deposits rose 20% to $ 1.3 trillion as customers, faced with economic uncertainties, borrowed less and saved more.
Citi’s revenue fell 10%, mainly due to a decline in its global consumer banking business. Fees in the North American branded card industry, once a growth engine for consumer banking, fell 13% on lower purchase sales and higher payments.
Trading remained a bright spot amid growing fears that the skyrocketing growth in trading income seen throughout 2020 was not sustainable.
Commissions on equities jumped 57% from a year ago and commissions on fixed income rose 7%.
(Reporting by Ambar Warrick in Bengaluru and Imani Moise in New York; Editing by Arun Koyyur)
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