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Citigroup’s quarterly profit drops 26%

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Citigroup’s quarterly profit drops 26%

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Citigroup Inc.’s fourth-quarter profit fell 26%, the bank said on Friday.

The bank posted net income of $ 3.2 billion, or $ 1.46 per share, beating analysts’ expectations for $ 1.39 per share, according to FactSet.

Revenue rose 1% to $ 17 billion, better than the $ 16.8 billion forecast by analysts.

For the full year, Citi’s profit nearly doubled to $ 22 billion, and revenue fell 5% to $ 71.9 billion.

Under the leadership of Chief Executive Officer Jane Fraser, Citigroup abandoned numerous international consumer operations in an effort to streamline operations and increase profitability. Citigroup is withdrawing from consumer activities in 14 countries, including Mexico, one of its largest foreign markets.

The work, particularly a plan to shut down operations in South Korea, pushed spending 18% in the quarter to $ 13.5 billion. This resulted in lower profits at the same time as the income from its market trading operations declined. Wild markets have fueled business income and bank profits throughout the pandemic.

Revenues for the institutional client group increased 4% to $ 9.9 billion. Trading revenue fell 17% in the quarter. Investment banking fees from advising companies on mergers and underwriting equity and debt sales rose 43%.

On the consumer side, revenues fell 6% to $ 6.9 billion and profits fell 42%, penalized by low interest rates and restructuring spending.

Spending on Citigroup credit cards increased by 20%. But customers continued to pay the fees, and card loans fell 1%. Customers, full of cash during the pandemic, were paying off their cards every month and borrowing on a limited basis, but executives said they believed loans would increase in 2022.

Citigroup’s loan profitability fell again, with its net interest margin standing at 1.98% from 1.99% in the previous quarter.

If the Federal Reserve raises interest rates as expected, banks should be able to increase loan profits by charging more for loans, even if they keep deposit rates close to zero.

The bank freed up an additional $ 1.4 billion from reserves it had built up for potential loan losses, increasing net income for the quarter. In total for the year, the bank released nearly $ 5 billion, having set aside $ 17.5 billion in 2020, a variation that fueled the big profit gain for the year.

Citigroup’s return on tangible common stocks, the key to its profitability, was 7.4% in the quarter and 13.4% for the year. In March, Fraser plans to detail strategic plans to close the gap between Citi and its competitors on this metric.

The stocks, which had underperformed their big rivals, fell about 3.8% to $ 65.21 in pre-market trading.

Write to David Benoit at david.benoit@wsj.com

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Citigroup’s quarterly profit drops 26%

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