Citigroup’s fourth-quarter profit falls 21% as the bank sets aside more money for credit losses

Citigroup Fourth-quarter net income fell more than 21% from a year ago as a decline in investment banking overshadowed benefits from higher interest rates. The bank also said it is setting aside more money for credit losses.

Shares rose in early trading after the report.

Here are the numbers for the fourth quarter versus what Wall Street expected:

• Net income: $2.5 billion versus $3.2 billion a year ago.
• Earnings: $1.10 per share, excluding certain sales. (It was not clear whether that was comparable to the $1.14 per share estimate from analysts.)
• Revenue: $18.01 billion in revenue, above the $17.9 billion expected from analysts polled by Refinitiv.
• Net interest income: $13.27 billion, above the $12.7 billion expected by analysts, according to StreetAccount
• Trading revenue: Fixed income $3.16 billion, above expectations. Stock trading was 789 million dollars, below expectations.
• Provision for credit losses: $1.85 billion, compared with $1.79 billion expected by analysts polled by StreetAccount.

Jane Fraser’s turnaround at Citigroup has hit a snag amid concerns over a global economic slowdown and as central banks around the world battle inflation. Like the rest of the industry, Citigroup is also struggling with a sharp decline in investment banking revenue, partially offset by an expected increase in trading results in the quarter.

Citigroup’s net income fell 21% to $2.5 billion from $3.2 billion a year earlier, largely due to loan growth at the private bank along with expectations of a weaker macroeconomic environment going forward. The weakness was partially offset by higher revenues and lower costs.

The bank said it was setting aside more money for credit losses going forward, increasing provisions 35% from the previous quarter to $1.85 billion. This build included $640 million in unfunded liabilities due to loan growth at the private bank.

Revenues in the services and markets divisions increased by 32% and 18% respectively, driven by growth in interest income and growth in fixed income markets, driven by strength in interest rates and currency. There was also strength in banking, with private banking revenues up 5% and US personal banking revenues up 10%. However, banking income fell 3% due to lower mortgage volumes.

“With their revenues up 32%, Services delivered another excellent quarter and we have gained significant share in both finance and trading solutions and securities services,” CEO Jane Fraser said in a press release. “Markets had their best fourth quarter in recent memory, driven by a 31% increase in interest-bearing income, while banking and wealth management were affected by the same market conditions they faced throughout the year.”

JPMorgan, Bank of America and Wells Fargo also reported earnings on Friday. JPMorgan topped analyst estimates for the quarter, saying it now sees a mild recession as the basis for 2023. Bank of America also beat Wall Street expectations as higher interest rates offset losses in investment banking.

Wells Fargo however, shares fell after the bank reported that profits fell in the latest quarter due to a recent settlement and the bank’s increased reserves amid economic weakness.

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