Citigroup’s profits dropped by more than one-fifth in the fourth quarter, as higher revenues from fixed income trading and its corporate treasury services business failed to pick up the slack from a drop-off in investment banking.
Citi said net income for the final three months of 2022 was $2.5bn, or $1.16 a share, in line with analysts’ estimates, but down almost 22 per cent from $3.2bn in the same period last year.
Chief executive Jane Fraser is in the middle of a costly restructuring programme for the bank following scrutiny from regulators about its operational controls and years of underperformance. She warned in March that Citi would continue to lag behind Wall Street rivals in the coming years.
Overall revenues in the fourth quarter were $18bn, in line with analysts’ estimates. Citi’s net interest income — the difference in what banks pay on deposits and what they earn from loans and other assets — was almost $13.3bn, up 23 per cent from a year ago, helped by the Federal Reserve’s aggressive campaign to raise interest rates.
Revenues at Citi’s services division, which house the Treasury and Trade Solutions business that Fraser describes as the bank’s “crown jewel”, reported revenues of $4.3bn, up 32 per cent and ahead of estimates of $4.1bn.
Investment banking revenues in the fourth quarter were down 58 per cent at $645mn, compared with analysts’ estimates of $722bn. Like all Wall Street banks, Citi’s investment banking revenue has suffered this year from a prolonged slowdown in dealmaking activity.
Revenues in Citi’s trading division, which has benefited from increased activity during recent market volatility, were up 18 per cent to $3.9bn. Analysts had forecast revenue to be $3.7bn. The gains were driven by a 31 per cent increase in revenues from its fixed income operations.
Citi reported a return on average tangible common equity (Rotce) of 5.8 per cent for the quarter and 8.9 per cent for 2022. The bank set a target of a Rotce of 11 per cent to 12 per cent over the next three to five years.
Citi said its common equity tier one capital ratio, a crucial benchmark for financial strength, was 13 per cent, up from 12.3 per cent three months earlier.
Fraser is working to exit many of its retail banking operations overseas, including its consumer businesses in Mexico and Poland. In October, the bank said it would shut down its institutional banking operations in Russia amid the country’s war with Ukraine.
Citi reported earnings on Friday alongside Bank of America, JPMorgan Chase and Wells Fargo. Goldman Sachs and Morgan Stanley, whose business skew more towards investment banking, trading and asset management, report earnings on Tuesday.
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