Citigroup earnings beat expectations thanks to strong investment bank

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The Citi bank logo is pictured at an exhibition hall in Bangkok, Thailand May 12, 2016. REUTERS/Athit Perawongmetha

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Jan 14 (Reuters) – Citigroup Inc (CN) on Friday posted a 26% drop in fourth-quarter profit but beat market expectations as strong gains in its investment banking business cushioned the blow of increased spending.

The bank’s profit fell to $3.2 billion, or $1.46 per share, for the quarter ended Dec. 31, from $4.3 billion, or $1.92 per share, a year earlier. early. Excluding the impact of costs related to divestments in Asia, the bank earned $1.99 per share.

Analysts on average had expected earnings of $1.38 per share, according to data from Refinitiv IBES.

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Citigroup’s investment banking arm had a strong quarter on the back of a frenzy of mergers and acquisitions activity. Institutional Clients revenue increased 4%, driven by a 43% increase in investment banking fees.

It helped offset losses from higher spending as the bank continues to wind down the last of its consumer businesses outside the US as part of Chief Executive Jane’s ‘strategy refresh’ Fraser.

The bank’s shares were down 2.3% in premarket trading, but have gained more than 12% so far this year.

Citigroup said earlier on Friday that it had agreed to sell its consumer businesses in Indonesia, Malaysia, Thailand and Vietnam to Singapore-based lender United Overseas Bank (UOBH.SI). Read more

With the deal, the bank announced divestiture plans for seven of the 13, mostly Asian, consumer businesses Fraser said would be shelved in April.

“We have made the final decision regarding updating our strategy with respect to the markets we intend to exit,” Fraser said in a statement.

The bank has incurred higher costs for several quarters to fix problems identified by regulators in its control systems, leading investors to wonder how much money and how long the fixes will take.

In the fourth quarter, the bank’s operating expenses jumped 8%, excluding the impact of divestments in Asia.

While overall net interest income was flat year-over-year at $10.82 billion, NII from the bank’s core lending business outside markets increased 0.6% .

Net interest margin, which measures the difference between what Citigroup pays for cash and what loans and securities earn, fell to 1.98% from 2.06% a year earlier and 1, 99% in the third quarter.

Treasury and Trade Solutions revenue, generally considered Citigroup’s strongest corporate business, fell 1% due to low interest rates.

Total revenue increased 1% year over year to $17 billion.

Wall Street peers JPMorgan Chase & Co (JPM.N) and Wells Fargo & Co also reported results on Friday, with earnings comfortably beating consensus estimates. Read more

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Reporting by Niket Nishant in Bengaluru and David Henry in New York; Editing by Aditya Soni

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