Citigroup’s first-quarter profit drops 46% on loan loss provisions and the dealing crisis


Citigroup Inc posted a 46% plunge in first-quarter profit on Thursday, driven by Russia-related loss provisions, lower underwriting fees and higher expenses.

Citi – the most global of US banks – added $1.9 billion to its reserves in the quarter to prepare for losses from direct exposures in Russia and the economic impact of war in Ukraine.



That pushed credit costs to $755 million, a contrast to the $2.1 billion a year ago when it released loss reserves built up during the COVID-19 pandemic.

The bank said it reduced its exposure to Russia to $7.8 billion from $9.8 billion in December. If the conflict follows an extremely adverse scenario, it would lose just $3 billion, down from nearly $5 billion estimated last month.

Net income fell to $4.30 billion, or $2.02 per share, for the quarter to March 31, from $7.94 billion, or $3.62 per share, a year earlier.

Analysts on average had expected earnings of $1.55 per share, according to data from Refinitiv IBES.

Revenue fell 2% to $19.2 billion.

This was mainly due to a 43% drop in investment banking revenue as last year’s rush of deals involving blank check firms dwindled, drying up underwriting fees.

Revenue from treasury and business solutions – Citi’s crown jewel business – rose 18% due to higher net interest income and fee growth.

“As the geopolitical and macroeconomic environment has become more volatile, we are executing the strategy we announced at our recent Investor Day,” Chief Executive Jane Fraser said in the earnings announcement.

Fraser is leading an overhaul of Citi, which is lagging behind the financial performance of its peers and must carry out orders from US banking regulators to fix its risk and compliance systems.

Its surge did push up costs, however, with spending up 10% in the quarter, excluding those related to divestitures in the consumer business in Asia.


Redemptions

Still, Citi used any excess capital to buy back stock. Unlike other big banks, its shares trade at a price below its net worth, which makes buyouts attractive.

The bank returned $4 billion to shareholders in the quarter, including $1 billion in dividends, and its share count was 6% lower than a year earlier.

The redemptions came as Citi’s capital account was hit by unrealized losses on securities following the recent rise in interest rates.

Its Common Equity Tier 1 capital ratio fell to 11.4% from 12.2% in December. The bank announced its intention to reduce the ratio to 12% by the end of the year.

A similar decline was reported by JPMorgan Chase & Co on Wednesday, heightening investor concerns that bank takeovers would be limited this year.

(This story has not been edited by Business Standard staff and is auto-generated from a syndicated feed.)

Dear reader,

Business Standard has always endeavored to provide up-to-date information and commentary on developments that matter to you and that have wider political and economic implications for the country and the world. Your constant encouragement and feedback on how to improve our offering has only strengthened our resolve and commitment to these ideals. Even in these challenging times stemming from Covid-19, we remain committed to keeping you informed and updated with credible news, authoritative opinions and incisive commentary on relevant topical issues.
However, we have a request.

As we battle the economic impact of the pandemic, we need your support even more so that we can continue to bring you more great content. Our subscription model has received an encouraging response from many of you who have subscribed to our online content. More subscription to our online content can only help us achieve the goals of bringing you even better and more relevant content. We believe in free, fair and credible journalism. Your support through more subscriptions can help us practice the journalism we are committed to.

Support quality journalism and subscribe to Business Standard.

digital editor

Comments are closed.