By David Henry and Tanya Agrawal
Jan 16 Citigroup Inc posted
weaker-than-expected quarterly results on Thursday, as
lackluster bond-trading results weighed on overall revenue.
The third-largest U.S. bank said its fixed-income revenue
fell 15 percent to $2.33 billion in the fourth quarter from the
same quarter last year, in what it called a "challenging trading
environment." The bond trading results lagged rivals' including
Bank of America Corp and JPMorgan Chase & Co.
The bank still posted rising profit, helped by cost-cutting,
but the size of the decline in bond trading revenue surprised
many analysts. Much of the drop came from falling client
activity in corporate bonds and secured debt, said Jon Gerspach,
chief financial officer, on a conference call with reporters.
Rising bond yields have cut into demand for issuing and trading
"We just saw a fall-off in client volumes," Gerspach said.
When asked if there was any explanation, he responded, "No, it's
just what we saw."
Citigroup's fourth-quarter adjusted net income rose to $2.60
billion, or 82 cents per share, from $2.15 billion, or 69 cents
per share, a year earlier, the bank said. The
adjusted results strip out items including costs associated with
layoffs and restructuring, and accounting adjustments linked to
changes in the value of the company's debt.
Analysts on average expected earnings of 95 cents per share,
according to Thomson Reuters I/B/E/S. The average estimate came
down 10 cents in the last two weeks, partly in expectation of
weak fixed-income market revenue.
"Although we didn't finish the year as strongly as we would
have liked, we made substantial progress toward our key
priorities in 2013," Chief Executive Michael Corbat said in a
The results reflect the difficulties that Corbat faces as he
tries to turn around the third largest U.S. bank. He took the
reins of the bank in October 2012, after directors pushed out
Vikram Pandit, and has been trying to lower costs while boosting
Corbat has had more luck with costs than revenue. Operating
expenses fell 13 percent to $11.93 billion during the quarter,
while revenue fell 1 percent to $17.78 billion.
Citigroup's operating expenses in the quarter included $809
million in legal and related expenses, down from $1.3 billion a
year earlier, as the bank worked to leave behind legal troubles
that stemmed mainly from the mortgage crisis.
But its legal troubles might not be over. A source told
Reuters on Wednesday that U.S. regulators sent investigators to
its London headquarters as part of an international
investigation into alleged manipulation of the global currency
Citigroup drew down loan loss reserves by $670 million,
compared with $91 million a year earlier.
Unadjusted net income rose to $2.69 billion, or 85 cents per
share, from $1.20 billion, or 38 cents per share, a year
Citigroup shares were down 3.6 percent at $52.99 on the New
York Stock Exchange on Thursday morning. The stock rose 32
percent in 2013, slightly less than the 35 percent rise of the
KBW Bank Index.
SHEDDING BAD ASSETS
Citigroup said late on Wednesday that it is selling mortgage
servicing rights of $10.3 billion Fannie Mae
residential first mortgage loans as it looks to reduce assets
and expenses within its Citi Holdings division.
Citi Holdings houses the portfolio of troubled mortgage
assets the bank is winding down after they led to huge losses
since the financial crisis.
Citi Holdings' assets, which totaled $117 billion, or about
6 percent of the company's total assets at the end of December,
have long been a drag on the company, tying up capital and
generating losses. They once accounted for about 40 percent of
total assets. Assets in Citi Holdings fell 4 percent from the
third quarter to the fourth quarter.
While Corbat has said that dealing with Citi Holdings is a
priority, he has warned that there is no practical way to
quickly get rid of the rest of those troubled assets.
Citigroup's global consumer banking revenue fell 5 percent
to $9.47 billion.