Citigroup Inc.’s fixed-income traders turned in a record-setting finale to 2022 as the bank, under pressure to improve returns, braced itself for a less certain economy.
(Bloomberg) — Citigroup Inc.’s fixed-income traders turned in a record-setting finale to 2022 as the bank, under pressure to improve returns, braced itself for a less certain economy.
Customers’ bets on rates and currencies boosted revenue from fixed-income trading 31% to $3.2 billion, the firm’s largest haul ever for a fourth quarter. Total trading was up 18% — trouncing the 10% increase predicted by executives just last month.
The windfall and stronger earnings from credit cards helped Citigroup beat analysts’ estimates for both revenue and profit, even as other challenges came into clearer focus. The company failed to cut expenses as much as analysts predicted, and set aside more than they expected for souring loans.
“We intentionally designed a strategy that can deliver for our shareholders in different environments,” Chief Executive Officer Jane Fraser said in a statement announcing results Friday. The bank is “very much on track” to meet targets for improving returns, she said.
Citigroup previously said it aims to boost return on tangible common equity to between 11% and 12% in the medium term. It ended last year at 8.9%.
In a separate presentation, Citigroup said revenue in 2023 is likely to reach between $78 billion and $79 billion, higher than the $76 billion analysts in a Bloomberg survey are currently calling for. Costs, meanwhile, are expected to be $54 billion, which also tops estimates. Both forecasts exclude the impacts tied to the firm’s work to exit over a dozen international retail units around the world.
Shares of Citigroup fell by 1.2% to $48.51 at 9:45 a.m. in New York.
Citigroup’s results came on the heels of similar reports from rivals JPMorgan Chase & Co., Bank of America Corp. and Wells Fargo & Co. JPMorgan warned investors that this year’s net interest income will be lower than analysts expected, while Bank of America reported $3.72 billion in trading revenue for the three months through December, up 27% from a year earlier, more than the 13% gain analysts had forecast.
Banks across Wall Street have been leaning on trading to weather slumps in dealmaking, underwriting and wealth management triggered by rising interest rates and lower stock prices. That’s provided some relief for Fraser as she spends heavily to overhaul risk management and other internal controls to appease regulators. Efforts to simplify the bank by selling units abroad have eliminated some expenses.
The quarter’s 21% drop in net income to $2.5 billion was less severe than analysts predicted. Earnings per share amounted to $1.16, topping their average estimate of $1.14.
Operating expenses dipped 4% to $13 billion in the quarter, still more than the $12.9 billion analysts estimated. Excluding costs from exiting more than a dozen international retail units, expenses rose 5%.
Provisions for souring loans amounted to $1.8 billion, a contrast from a year earlier, when the lender released prior reserves. This time, the firm blamed a worsening macroeconomic environment as it added them back. The figure includes $1.2 billion in credit losses, which were up 36%.
(Updates share price in seventh paragraph.)
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