Investment banking fees rose, but trading revenue fell
For the full year, Citi’s profit nearly doubled to $22 billion and revenue fell 5% to $71.9 billion.
Under Chief Executive Jane Fraser, Citigroup is spun off several international consumer operations in an effort to simplify its business and boost profitability. Citigroup is withdrawing from consumer operations in 14 countries, including Mexico, one of its largest overseas markets.
The work, specifically a plan to shut down operations in South Korea, drove spending up 18% to $13.5 billion in the quarter. It pulled profits down at the same time as revenue from its market trading operations fell. Wild markets have driven trading revenue and banks’ profits during the pandemic.
Revenue in the Institutional Client group increased 4% to $9.9 billion. Trading revenue fell 17% in the quarter. Investment banking fees from companies advising on mergers, and underwriting stock and debt sales increased 43%.
On the consumer side, revenue fell 6% to $6.9 billion and profit fell 42%, hurt by lower interest rates and restructuring expenses.
Spending on Citigroup credit cards up 20%. But customers continued to pay fees and card debt fell 1%. Customers, with no cash in the pandemic, were paying off their cards every month and had limited borrowing, but officials have said they believe credit will increase in 2022.
Citigroup’s lending profitability slipped again, with its net interest margin down 1.98% from 1.99% last quarter.
If the Federal Reserve raises interest rates as predicted, banks should be able to increase loan profits by charging more for loans even if deposit rates are kept near zero.
The bank released another $1.4 billion from reserves made up for potential loan losses, boosting the bottom line in the quarter. In total for the year, the bank issued nearly $5 billion, after setting aside $17.5 billion in 2020, a swing that powered large gains for the year.
Citigroup’s return on tangible common equity, the key measurement stick for its profitability, was 7.4% in the quarter and 13.4% for the year. In March, Ms Fraser plans to expand strategy plans aimed at bridging the gap between Citi and rivals on that metric.
Shares, which were underperforming larger rivals, fell nearly 3.8% to $65.21 in premarket trading.
Write David Benoit [email protected] . Feather