By Saabira Chaudhuri
Citigroup Inc.'s fourth-quarter profit plunged 86% from a year
earlier as the bank logged a massive legal charge and trading
revenue also disappointed.
Shares fell 2.2% in recent premarket trading after results
missed the estimates of analysts polled by Thomson Reuters.
Citigroup reported a profit of $250 million, which includes $3.5
billion in previously disclosed legal and repositioning charges,
compared with a year-earlier profit of $2.46 billion. On a
per-share basis, Citigroup reported a profit of six cents. Analysts
polled by Thomson Reuters had expected earnings of nine cents a
share including the charges.
Revenue was roughly flat, or down 0.8% on an adjusted basis, at
$17.81 billion. Analysts had expected $18.51 billion.
The impact of a stronger dollar pressured revenue at Citigroup
in the fourth quarter. Perhaps the U.S.'s most internationally
focused bank, Citigroup's revenue declined $458 million from a year
ago due to foreign exchange impacts.
Citigroup has muddled through a rough 2014, with deepening legal
probes and uneven economic conditions that came on top of
regulatory issues at the bank's Mexico unit, Banamex, and a $7
billion mortgage-securities settlement with the Justice
Department.
Pressure from regulators and investors has also mounted after
Citigroup last year failed the Federal Reserve's annual stress
test. Any guidance on dividend and buyback plans that the bank
gives on its fourth-quarter earnings call with analysts on Thursday
will be closely parsed.
Citigroup's results follow the first day of bank earnings season
Wednesday, when J.P. Morgan Chase & Co. earned less than
analysts expected, due to elevated legal costs and depressed
trading revenue. Bank of America also reported its quarterly
earnings Thursday morning.
Citigroup reported a 14% drop in trading revenue to $2.46
billion from a year earlier, which is significantly worse than what
Chief Executive Michael Corbat in December had warned the bank was
expecting for the quarter.
The Wall Street Journal recently reported that Citigroup last
week told trading executives that its securities arm's December
results were worse than expected. The bank made a last-minute
decision to cut the bonus money it had set aside for traders, while
it had previously planned on leaving its bonus pool flat.
Fixed income trading revenue at Citigroup tumbled 16% from a
year earlier to $1.99 billion, while equities trading revenue fell
2.7% to $471 million.
The results come after rival Bank of America Corp. also reported
trading results that were worse than expected, with sales and
trading revenue plunging 20% from a year earlier to $2.37 billion
after a tough December.
Citigroup's results weren't helped by lower ongoing expenses
either this quarter. Fourth-quarter operating expenses, excluding
the legal and repositioning charges, were flat from a year earlier
at $10.92 billion.
Analysts at Deutsche Bank recently said they think 2015 earnings
estimates for Citigroup are "likely too high" as regulatory and
legal costs as well as those tied to the Fed's stress tests are
probably higher than expected.
Last month, the New York bank said it would spend billions in
the fourth quarter to cover the cost of investigations into how it
has complied with anti-money-laundering rules and probes of its
trading in currencies and interest rates. That came after in late
October, Citigroup cut its third-quarter earnings after boosting
its legal accruals by $600 million.
Legal and so-called repositioning expenses--or those tied to
Citigroup's cost-cutting efforts--as previously disclosed were
about $3.5 billion, up from $363 million a year earlier.
Write to Saabira Chaudhuri at saabira.chaudhuri@wsj.com
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