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Citigroup Beats Profit Expectations for Fourth Quarter – The Wall Street Journal

citigroup-beats-profit-expectations-for-fourth-quarter-–-the-wall-street-journal

Citigroup Inc.


C -6.28%

said Friday that its fourth-quarter income fell 7% and that it drew down some of the reserves it had set aside to cover potentially soured loans.

The New York bank said profit fell to $4.63 billion, or $2.08 a share, compared with $4.98 billion, or $2.15 a share, a year earlier. That still beat the $1.34 expected by analysts polled by FactSet.

Revenue fell 10% to $16.5 billion, falling short of the $16.72 billion analysts had expected.

For all of 2020—a year of upheaval in the economy—profit at the nation’s third biggest bank by assets fell 41% to $11.37 billion, and revenue was flat at $74.3 billion. Like its big bank peers, Citigroup enjoyed strong results from its Wall Street operations, but that was offset by the billions of dollars it had to designated for potentially bad loans.

In a sign that its outlook on the economy has improved, Citigroup drew down $1.5 billion of the reserves it had put aside for future loan losses, a big reason the bank’s profit was better than expected.

It will be the last earnings day for Chief Executive

Michael Corbat,

who is retiring in February after the bank completes its 2020 financial statements. He will be succeeded by President

Jane Fraser,

who has led various divisions since joining Citigroup in 2004 and recently ran the consumer bank.

Ms. Fraser told analysts she was looking closely 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 that is with a purpose of generating the desired returns for our investors,” she said. “You can hold me accountable for doing so, along with the management team. We’re a team on a mission to get this done. And we will get this done.”

Shares of Citigroup fell 23% in 2020, underperforming the S&P 500’s 16% increase and the KBW Nasdaq Bank Index, which fell 14%. But in the first two weeks of 2021, bank stocks have risen on hopes of an economic recovery spurred by vaccines and potentially more government stimulus. Citigroup shares are up 12% in the new year.

When the coronavirus tore through industry, commerce and society in March 2020, the U.S. economy came to a screeching halt. Top executives relive the tough decisions they made as they scrambled to weather the storm. Photo Illustration: Adele Morgan/The Wall Street Journal

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

Citigroup stock is expected to get a boost when the bank restarts share repurchases. The Federal Reserve had been blocking such buybacks for all big banks in the pandemic but said last month that the banks could restart this quarter, with limits. Financial chief

Mark Mason

told reporters that Citigroup could buy back up to $1.8 billion in shares in the first quarter under the Fed rules, but the board hasn’t completed repurchase plans yet.

For the quarter, profit in the institutional clients group, which includes trading and investment banking, rose 27% to $3.65 billion, while revenue fell slightly to $9.28 billion.

Trading revenue rose 14%, while investment banking revenue fell 5%.

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

The consumer bank’s fourth-quarter 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 rose 12% compared with the third quarter. It was the highest level of the year, showing a continued consumer comeback.

Citigroup said operating expenses rose 2% to $10.71 billion, a line investors are watching closely. Regulators in the fall slapped Citigroup with an order to rebuild its vast internal risk systems, a project that is expected to take several years at significant cost. Mr. Mason said expenses would rise about 2% in 2021. He pushed back on an analyst’s characterization of the bank’s costs as bloated, saying they are investments that will reap returns in the future.


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Citigroup said its return on tangible common equity, a closely watched measure of its profitability that judges how efficient it is, jumped to 11.4% in the fourth quarter from 7.6% in the third quarter. That is higher than analysts expected it to get in any quarter over the next two years.

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

“The financial results this year aren’t what I would have wanted them to be for my last year as CEO,” Mr. Corbat said. But, he added, “I’m proud of the fact that we’ve shown we can go through a crisis and emerge even stronger. Unlike the events of more than a decade ago.”

Write to David Benoit at [email protected]

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