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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.
Image source: Getty Images.
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.
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