By David Benoit 

Citigroup Inc. said Wednesday its first-quarter profit plunged 46%, after the bank set aside nearly $5 billion to prepare for a wave of loan defaults, wiping out a strong quarter from its investment bank.

Citigroup has offices around the world, giving it an early view into the spread of the coronavirus but also making it particularly vulnerable to a global pandemic. The bank moves money around the world for governments and multinational corporations, many of which have pulled back sharply during the coronavirus shutdown.

Shares fell 4.3% to $43.40 on Wednesday. They have lost 46% of their value this year, more than other big banks.

Citigroup's profit for the first three months of the year fell to $2.52 billion, or $1.05 a share, from $4.71 billion, or $1.87 a share, a year earlier. Analysts had expected $1.07 a share, according to FactSet, a forecast that has been cut in half since late February.

Revenue rose 12% to $20.73 billion, compared with $18.58 billion a year earlier and the $19.03 billion analysts expected.

Citigroup increased its loan-loss provision, money for loans it now thinks can go bad, by $4.92 billion, compared with just $278 million in the prior quarter, reflecting concerns about the economy and an accounting change. Of that, $2.85 billion came in the consumer bank and another $1.88 billion in the corporate bank. Its total provision in the quarter was $7 billion.

Citi executives warned it will be difficult to estimate the full extent of the loan losses the bank is likely to suffer in the coming months, a period that is likely to bring a flood of missed debt payments.

The bank pulled its full-year returns guidance and said it was considering changing some of its investment plans to offset lost revenue.

"Looking forward, there are too many unknowns to count," Chief Executive Michael Corbat said on a conference call with analysts. "But I feel confident in our ability to manage through whatever scenario comes to pass."

Citigroup's consumer bank bore the brunt of the pain in the first quarter. Revenue rose 1% to $8.17 billion, but credit costs sent it to a $754 million loss.

Chief Financial Officer Mark Mason said Citigroup's credit-card customers have cut their spending by some 30% since late March. Spending on travel has fallen 75%, while dining and entertainment spending is down 60%. Spending on consumer essentials rose by 10%, he said.

The increased reserves for potential loan losses neutralized a strong quarter for the bank's institutional group, which serves large companies around the globe. Its revenue jumped 25% to $12.48 billion and profit rose 7%, both well above analyst expectations.

The bank's markets group recorded a 39% gain in revenue, with equities and fixed income both up by the same.

It also netted a $754 million gain on the value of hedges it keeps on corporate lending.

Citi's corporate clients raced to bolster cash positions, drawing down credit lines from the bank and parking deposits. Citi's corporate loan book rose by more than $40 billion, or 11%, in the quarter, pushing its total loans up 6%. Across the bank, deposits were up 15% to $1.18 trillion, including a 19% gain in corporate.

Write to David Benoit at david.benoit@wsj.com

 

(END) Dow Jones Newswires

April 15, 2020 13:12 ET (17:12 GMT)

Copyright (c) 2020 Dow Jones & Company, Inc.
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