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Citigroup fourth-quarter profit drops 21% as bank sets aside more cash for credit losses

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Citigroup said it identified the cause of the flash failure and corrected the error “within minutes”.

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Citigroup said fourth-quarter net profit fell more than 21% from a year earlier as declines in investment banking offset the benefit of higher interest rates. The bank also said it was setting aside more money for credit losses.

Shares rose in early trading after the report as revenues in the markets division rose on the back of a record quarter for fixed income trading.

Here are the fourth quarter numbers versus what Wall Street expected:

  • Net income: US$ 2.5 billion against US$ 3.2 billion a year ago.
  • Earnings: $1.10 per share, excluding certain divestments. (It was unclear whether that was comparable to analysts’ estimate of $1.14 a share.)
  • Revenue: $18.01 billion in revenue, up from the $17.9 billion expected by analysts polled by Refinitiv.
  • Net interest income: $13.27 billion, up from $12.7 billion analysts expected, according to StreetAccount
  • Trading Revenue: Fixed Income US$3.16 billion, above expectations. Equity trading was $789 million, below expectations.
  • Allowance for credit losses: $1.85 billion, compared with $1.79 billion expected by analysts polled by StreetAccount.

Jane Fraser’s recovery efforts at Citigroup have hit a snag amid concerns about a global economic slowdown and central banks around the world struggling with inflation. Like the rest of the industry, Citigroup is also struggling with a sharp decline in investment banking revenue, partially offset by an expected increase in trading results for the quarter.

Citigroup’s net income fell 21% to $2.5 billion from $3.2 billion a year earlier, largely due to growth in lending at its private bank, along with expectations of a tighter macroeconomic environment. weak in the future. The weakness was partially offset by higher revenues and lower expenses.

The bank said it has set aside more money for credit losses going forward, increasing provisions by 35% from the previous quarter to $1.85 billion. This build included $640 million of unfunded commitments due to growth in private bank lending.

Revenues in the services and markets divisions increased by 32% and 18%, respectively, driven by growth in interest income and fixed income markets. The fixed-income markets division saw revenues jump 31% to $3.2 billion, its highest fourth-quarter results ever, due to the strength of rates and currencies.

“With its revenues growing 32%, services delivered another excellent quarter and we gained significant share in treasury and trading solutions and securities services,” CEO Jane Fraser said in a press release. “The markets had the best fourth quarter in recent memory, driven by a 31% increase in Fixed Income, while the banking and wealth management sectors were impacted by the same market conditions they faced throughout the year.”

There was also strength in the banking sector, with private banking revenues gaining 5% and US personal banking revenues rising 10%. Retail bank revenues, however, fell 3% due to lower mortgage volume.

JPMorgan, Bank of America and Wells Fargo also reported results on Friday. JPMorgan beat analysts’ estimates for the quarter and said it now sees a mild recession as a baseline scenario for 2023. Bank of America also beat Wall Street expectations as higher interest rates offset losses at investment.

Wells Fargo Shares fell, however, after the bank reported that profits fell in the last quarter due to a recent deal and the bank’s bolstered reserves amid economic weakness.

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