Citigroup’s first-quarter earnings fell 46%
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3 min read . Updated: 14 Apr 2022, 08:00 PM IST - Bank set aside $1.9 billion for potential losses tied to Russia and the war in Ukraine
Citigroup Inc.’s first-quarter profit fell 46%, dragged down by higher expenses and potential losses from its exposure to Russia.
Profit fell to $4.31 billion, or $2.02 per share, compared with analysts’ forecast for $1.43 per share. A year ago, Citigroup posted a profit of $7.94 billion, or $3.62 per share.
Revenue fell 2% to $19.19 billion but topped Wall Street’s expectations for $18.19 billion, according to FactSet.
The bank had $755 million in net credit charges for souring or potentially souring loans, a reversal from the prior year, when it had a $2.1 billion benefit.
Citigroup set aside $1.9 billion for potential loan losses from its exposures in Russia and the broader impact of the war in Ukraine. Chief Financial Officer Mark Mason said $1 billion of that is directly tied to Russia and the rest is to account for upheaval in international finance caused by the war.
Citigroup has a bigger presence in Russia, including a retail bank, than other U.S. banks. It has been racing to reduce the exposure to Russia, cutting it to $7.8 billion from $9.8 billion in December. Its most up-to-date forecast shows it expects to lose a maximum of $2.5 billion to $3 billion, down from the nearly $5 billion it had earlier warned was possible.
Mr. Mason said the bank had been able to shift part of its remaining exposure into likely safer assets, including deposits at the Russian central bank, and is working to reduce it further.
The bank also said it would exit commercial banking in Russia, but said it would continue working for large corporate clients there. About 85% of those clients are based outside of Russia, it said.
JPMorgan Chase & Co. said Wednesday it was budgeting for higher losses because of the war in Ukraine. JPMorgan also took some losses related to commodities such as nickel, which have been volatile since the invasion.
Citigroup Chief Executive Jane Fraser is pushing a new strategy that includes selling international consumer businesses while expanding wealth management and business banking. The changes required shuffling some business reporting lines, and Thursday is the first period with its new internal structure.
Revenue in the institutional clients group, which includes investment banking and trading, fell 2% to $11.16 billion and profit dropped 51% on expenses and the Russian credit charges.
Trading revenue dropped 2%, with fixed-income down 1% and equity trading down 4%. Total investment banking fees fell 43%, as equity and debt underwriting declined but fees from advisory work rose.
Revenue from the central Citigroup business helping global companies manage and move cash rose 18%, largely due to increased borrowing and the rejiggering of supply chains.
The consumer side, now named personal banking and global wealth management, reported revenue of $5.91 billion, down 1% from a year ago. Its profit fell 23%.
Consumer spending on credit cards increased 23% and credit-card loans rose 7%. Banks have been anxious to see consumer-card use turn into lending to help lift profits.
The quality of consumer loans remained strong and the bank released funds it had set aside for potential loan losses.
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Revenue from the wealth-management operation slipped 1%.
Total expenses rose 15% to $13.17 billion. The bank is under regulatory orders to complete a costly internal project to strengthen its risk systems.
Citigroup has been trading at a discount to other big U.S. banks because investors have been concerned about its costs and profit margins. The stock rose 1.9% on Thursday morning, outperforming rivals on the day.
This story has been published from a wire agency feed without modifications to the text