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Citigroup Q4 revenue drops on weak bond trading; earnings beat

Citigroup (C) reported an increase in fourth-quarter earnings, which also exceeded market expectations, mainly reflecting the bank’s cost-cutting initiatives. Revenues, meanwhile, declined and fell short of expectations hurt by a sharp fall in the fixed income securities business.  Shares of the financial services giant dropped about 1% following the announcement Monday.

Citigroup fourth quarter 2018 Earnings Infographic
Citigroup Q4 2018 Earnings Infographic

During the three-month period, adjusted profit rose to $4.2 billion or $1.61 per share from $3.7 billion or $1.28 per share a year earlier. Analysts were looking for slower growth. Earnings benefitted from a 4% decline in expenses to $9.89 billion. Unadjusted net income was $4.3 billion or $1.64 per share, compared to a loss $18.9 billion or $7.38 per share in the fourth quarter of 2017, which included one-time items related to the tax revision.

Revenues, meanwhile, dropped 2% year-over-year to $17.1 billion in the fourth quarter and came in below analysts’ forecast. The top line was negatively impacted by the continuing slump in trading revenue, marked by a 21% decline in the fixed-income segment that more than offset an 18% growth in the equity business.

The top line was negatively impacted by the continuing slump in trading revenue, marked by a sharp decline in the fixed-income segment

While the Institutional Clients Group as a whole registered a 1% dip in revenues, Global Consumer Banking remained flat. A wind-down of legacy assets in the corporate section also added to the downturn. Citi ended 2018 with a Return on Average Tangible Common Equity of 10.9% and an efficiency ratio of 57%.

The bank had total loans of $684 billion at the end of the quarter, higher by 3% compared to last year, and deposits of $1 trillion, up 6%. The management returned $5.8 billion of capital to common shareholders, which includes the repurchase of about 74 million shares.

Citigroup posts mixed results in Q3, shares up 2%

“A volatile fourth quarter impacted some of our market sensitive businesses, particularly Fixed Income. For 2019, we remain committed to delivering a 12% RoTCE and continuing to improve our operating efficiency during the year,” said Citi CEO Michael Corbat.

The last twelve months were relatively tough for Citigroup shares, which suffered a 30% fall during that period, underperforming sector. The stock dropped modestly in the premarket trading Monday, paring a part of the gains seen since the beginning of the year.

 

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