Here’s why Citigroup stock drops on Friday

What happened

The stock market had a slightly negative day on Friday, with the Dow Jones Industrial Average and S&P 500 both down less than 1% at 11:10 a.m. EST. However, stocks of large-cap banks Citigroup (NYSE: C) was a major underperformance, with stocks down 5% for the day.

So what

The brief explanation for today’s decision is that Citigroup just released its fourth quarter results, and investors don’t seem overly impressed.

Although Citigroup’s earnings exceeded analysts’ expectations, it was due to an unexpected reserve release of $ 1.5 billion more than the bank’s actual business performance. On the top line, revenue was down 10% from the fourth quarter of 2019.

However, the news was not all bad. Citigroup’s book value per share increased 4% year over year. Bank deposits have increased 20% from the same time last year as Americans saved money at historically high rates during the pandemic. Personal loans grew 4% year-over-year and Citi’s credit card business saw purchasing volume increase 12% from third quarter, indicating a healthy rebound in spending of consumption.

On the investment banking side, trading income (which has been a strong point throughout the pandemic) has increased 13% year over year. However, investment banking revenues fell 5% due to lower revenues from M&A advisers and a slowdown in debt underwriting.

Now what

To sum up, Citigroup had a good fourth quarter, but not great. And it’s also worth pointing out that even after today’s decline, the bank’s shares are up almost 60% from the start of November, so I wouldn’t be too concerned about the relatively slight pullback.