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Citigroup (NYSE:C) reported fourth-quarter profit that missed Wall Street estimates as bond trading slumped. The stock fell more than 2.5% in early New York trading.
January 16 -
Bank of America's chief executive, Brian Moynihan, has come under withering criticism the past few years from skeptics who doubted he could right the ship. After the company reported solid fourth-quarter profits Wednesday, some former doubters appeared to be altering their views.
January 15 -
Revenue at Citi's North American retail bank fell 35% year over year and officials warned that lower mortgage originations and continued spread compression would crimp revenues in the fourth quarter, and perhaps beyond.
October 15 -
Citigroup Inc. has entered an agreement to buy the Best Buy private-label card portfolio, which has about $7 billion in loans, from Capital One Financial Corp. Citi has also agreed to issue and manage new Best Buy-branded cards in the U.S.
February 19 -
New CEO Michael Corbat will cut 11,000 jobs, largely in Citi's global consumer banking division. The plan suggests Citi is hedging its strategy of being an omnipresent, upper-tier player in emerging markets.
December 5
Sometimes it hurts to be the student whose report gets graded last. The same holds true for banks.
Citigroup (NYSE:C), the final megabank to report fourth-quarter earnings, showed some signs of life in its core-banking business. Unfortunately, they weren't enough to draw the same boffo response from analysts as, say,
Citi
However, Citi's basic banking business in the U.S. demonstrated that it could be on the rebound, says Marty Mosby, an analyst at Guggenheim Partners.
"They had better loan growth than we expected in the North American consumer business," Mosby says. "Credit trends are continuing to be favorable, and we're continuing to see declines in net chargeoffs."
Still, many investors and analysts seemed uninspired by Citi's performance, perhaps reflecting problems in its investment banking business units, including a 15% drop in fixed-income revenue excluding accounting charges. Citi's shares fell 2.3% to $52.65 in Thursday afternoon trading.
Citi also may be suffering from a poor comparison to the fourth-quarter earnings at Bank of America, "who pretty much crushed it," says William Smith, CEO of SAM Advisors in New York, which owns shares in Citi.
Other big banks had good news, too.
But "everything was relatively lackluster" at Citi, Smith says. "If you had to pick a disappointment, bond trading was the biggest disappointment."
Loans were a bright spot, Mosby says. Total loans grew 2.9% to $648 billion, from a year ago. He also pointed out encouraging signs from credit quality, including a 23% decline in the allowance for loan losses, to $19.6 billion.
Still, Citi's consumer banking business in North America in the fourth quarter fell 8.2% to $4.9 billion, compared to a year earlier, largely on lower mortgage-refinancing volume and compressed profit margins. Retail banking revenue, an element of the broader consumer business, fell 35% to $1.1 billion, from a year earlier.
Some of those areas will improve as the economy rebounds, and as Citi ramps up new initiatives, like the acquisition of a
"As we begin to see our branded cards business revitalize, as we hopefully get some earnings out of the Best Buy acquisition, all of those things should be positive towards our North America earnings," Gerspach said.
In December 2012, soon after Michael Corbat replaced Vikram Pandit as CEO, Citi
"I feel as though I've been watching this movie and personally I've liked what I've seen for the first year but I feel like I'm at intermission, [on my] second box of popcorn waiting for your next act," Mayo said. "When do we get to see more about the restructuring at Citigroup?"
Corbat responded that Citi made progress last year in several areas, including an increase in net income, loans and deposits.
"We've got to be mindful of expenses and when you look at the drivers in our business, we are making progress against it," Corbat said during the call.
Corbat also noted that Citi had reduced its operating expenses by 2% in 2013, compared with a year earlier, and lowered its head count by 3%. And the company is on target for its plans to reduce the efficiency ratio at Citicorp the core business that Citigroup plans to retain to the mid-to-low 50% range, he said.
"If you take a look at the overall efficiency target that we said was going to be in the mid-50% we came down to 58% for Citicorp during 2013," Corbat said.
Citicorp includes core consumer banking and investment banking units, while Citi Holdings includes businesses that the company has planned to sell or wind down.
Some of Citi's expense measurements appear high because of the ongoing costs related to closing branches and reducing the workforce, Corbat said.
Citi will also likely close more branches this year, in the U.S. and abroad, to further reduce costs, Corbat said.
"We're still in the process of rationalizing our branch network in the U.S.," he said. "We still are looking to reduce our global real estate footprint. We still have facilities that are just larger than we currently need, based upon how we've been able to reduce head count, and there are still facilities leases that we need to exit."