Citigroup Inc. (C, Financial) posted its fourth-quarter 2020 financial results before the market opened on Jan. 15. The company surpassed earnings projections, but posted a revenue miss. Declining interest income in the consumer banking business as well as higher expenses negated a rise in trading revenue.
Shares surged 2% to $68 in premarket trading following the news.
Performance at a glance
The New York-based bank reported net income of $4.6 billion, which reflected a decline of 8% over the prior-year quarter. Adjusted earnings were $2.08 per share versus the $1.34 that analysts expected. Quarterly revenue came in at $16.5 billion, which could not live up to analysts' estimate of $16.7 billion.
The company's operating expense surged 2% to $10.7 billion, driven by investments in infrastructure and higher Coronavirus-related expenses. This was partly negated by efficiency savings as well as lower marketing and other discretionary spending. Credit costs amounted to -$46 million, down from $2.2 billion the year before, reflecting the release of $1.5 billion in previously-booked reserves for credit losses.
Net credit losses of $1.47 billion dropped 24% on a year-over-year basis. At quarter-end, the company's allowance for credit losses on loans stood at $25 billion, or 3.73% of total loans. That compares with $12.8 billion, or 1.84% of total loans, reported last year.
In a statement, CEO Michael Corbat commented on the bank's performance:
"We remain very well capitalized with robust liquidity to serve our clients. Our CET 1 ratio increased to 11.8%, well above our regulatory minimum of 10%. Our Tangible Book Value per share increased to $73.83, up 5% from a year ago. Given the Federal Reserve decision regarding share repurchases as we have excess capital we can return to shareholders, we plan to resume buybacks during the current quarter."
Segment details
Global consumer banking revenue declined 14% to $7.3 billion on lower loan volumes, reflecting lower consumer spending. This was partly offset by robust deposit growth.
Likewise, sales for the institutional clients group segment dipped 1% to $9.3 billion as lower revenue in the Treasury and Trade Solutions, Investment Banking and Corporate Lending more than offset a rise in fixed income and equity market revenue.
Within the segment, markets and securities revenue inched up 13% to $4.5 billion, primarily reflecting a 7% increase in fixed-income trading revenue. Moreover, equity market revenue surged 57% to $810 million thanks to a strong performance in cash equities, derivatives and prime finance.
Security service revenue was $650 million, which was flat as compared to the same period last year, but up 2% in constant dollars as lower spreads was more than negated by higher deposits and settlement volumes.
Disclosure: I do not hold any positions in the stock mentioned.
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