Jane Fraser, General Manager for Latin America at Citigroup Inc., speaks during the Milken Institute Global Conference in Beverly Hills, California on Monday, April 29, 2019.
Kyle Grillot | Bloomberg via Getty Images
Citigroup released fourth quarter results on Friday that beat analysts’ earnings estimates as the company partnered with rival JPMorgan Chase to free up reserves for credit losses.
Earnings fell 7% to $ 4.63 billion, or $ 2.08 per share, compared to $ 1.34 per share expected by analysts surveyed by Refinitiv, according to Citigroup. Company-wide revenue declined 10% to $ 16.5 billion, below the estimate of $ 16.7 billion.
The bank released $ 1.5 billion in reserves for loan losses, a move larger than analysts expected. That compares with a reserve build-up of $ 436 million in the third quarter and $ 253 million a year ago. As a result, borrowing costs for the period were more than $ 2 billion lower than a year ago.
Over the past year, banks have allocated tens of billions of dollars in provisions for loan losses in the expectation that shutdowns caused by the Covid shutdown would force customers large and small to default on credit. Now it seems like the industry has turned a corner and will begin releasing some of those reserves, increasing earnings and their ability to buy back stocks this year.
“As a sign of the strength and longevity of our diversified franchise, our sales remained unchanged through 2019 despite the massive economic impact of COVID-19,” said outgoing CEO Mike Corbat in the press release.
Citigroup shares fell 6.2%.
Citigroup made history when it announced that Jane Fraser would take over the running of the company. This made it the first major Wall Street bank to be run by a woman. Weeks before her successor at Corbat, Fraser spoke to investors and analysts for the first time on Friday. Shareholders wanted to know how Fraser, a former McKinsey partner who led Citi’s Latin American operations before becoming president in 2019, will improve the company’s bottom line.
Fraser said she is embarking on a review of the company’s strategy to best position it to meet its ROI targets and meet regulatory requirements.
“We’re taking a clinical look at our strategic positioning and assessing which companies can achieve leading market positions in a much more digitalized world,” said Fraser. “Like any true Scot, I believe there is value in unlocking by simplifying the company.”
Citigroup, the third largest US bank by assets, was hurt by relatively poor performance when compared to competitors such as JPMorgan Chase. The results have frustrated investors, including activist hedge fund ValueAct. The bank is also working on a government agency agreement to improve its internal risk controls after it accidentally sent nearly $ 900 million to Revlon lenders last year.
Citigroup has announced that trading sales will increase 15% year over year in the fourth quarter, while investment banking fees should increase 10% to 15%.
The shares of the New York-based bank fell 23% last year, compared with the KBW Bank Index’s 4.3% decline.
Here are the numbers:
- Earnings: $ 2.08 per share versus $ 1.34 per share for analysts surveyed by Refinitiv.
- Revenue: $ 16.5 billion versus an estimate of $ 16.7 billion.
JPMorgan on Friday reported fourth quarter earnings and sales that were above estimates.