Citigroup’s Fourth Quarter 2020 Profits Surpass Profit Estimates
Jane Fraser speaks at the Milken Institute Global Conference in Beverly Hills, California, United States, Monday, April 29, 2019.
Kyle Grillot | Bloomberg via Getty Images
Citigroup said profits fell 7% to $ 4.63 billion, or $ 2.08 per share, from $ 1.34 per share expected by analysts polled by Refinitiv. The company’s revenue fell 10% to $ 16.5 billion, below the estimate of $ 16.7 billion.
The bank released $ 1.5 billion in bad debt reserves, a bigger move than analysts had expected. This compares to a reserve building of $ 436 million in the third quarter and $ 253 million a year earlier. As a result, credit costs during the period were over $ 2 billion lower than a year earlier.
Last year, banks set aside tens of billions of dollars for loan loss reserves in hopes that Covid-related closures would force customers, large and small, to default on loans. Now it looks like the industry has turned a corner and will start releasing some of these reserves, increasing profits and their ability to buy back shares this year.
“A sign of the strength and sustainability of our diverse franchise, our revenues remained stable through 2019, despite the massive economic impact of COVID-19,” outgoing CEO Mike Corbat said in the statement.
Citigroup shares fell 6.2%.
Citigroup made history when it ad Jane Fraser took over as CEO, making her the first major Wall Street bank to be headed by a woman. Weeks before taking over from Corbat, Fraser spoke to investors and analysts for the first time on Friday. Shareholders wanted to know how Fraser, a former McKinsey partner who led Citi’s Latin American operations before becoming president in 2019, will improve the company’s returns.
Fraser said she was undertaking a review of the company’s strategy to best position it to meet its performance targets and meet the demands of regulators.
“We are taking a clinical look at our strategic positioning, assessing which companies can achieve market leadership positions in a much more digitalized world,” Fraser said. “Like any true Scotsman, I believe there is value to be unlocked by simplifying the business.”
Citigroup, America’s third-largest bank by assets, has been hampered by relatively poor performance relative to rivals including JPMorgan Chase. The results frustrated investors, including activist hedge funds ValueAct. The bank is also working under a regulatory consent order to improve its internal risk controls after it accidentally sent nearly $ 900 million to Revlon’s lenders last year.
Citigroup said it expects fourth-quarter trading revenue to increase 15% from a year earlier, while investment banking fees are expected to rise 10% to 15%.
Shares of the New York-based bank fell 23% last year, compared to the 4.3% drop in the KBW Bank index.
Here are the numbers:
- Earnings: $ 2.08 per share, compared to $ 1.34 per share of analysts polled by Refinitiv.
- Revenue: $ 16.5 billion, compared to the estimate of $ 16.7 billion.
Earlier Friday, JPMorgan Released Fourth Quarter Results and income that has exceeded estimates.