Citigroup beats earnings estimates on the release of reserves and claims to exit 13 markets outside the US
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 results Thursday that exceeded analysts’ estimates for first-quarter earnings with strong investment banking revenues and a higher-than-expected release of loan loss provisions.
The company also said it closed retail banking in 13 countries in Asia and parts of Europe to focus more on wealth management outside of the US. This was one of the first major strategic moves for CEO Jane Fraser, who took over the business in February.
The bank’s shares rose 3.1% in premarket trading.
The bank reported earnings of $ 7.94 billion, or $ 3.62 per share, beating Refinitiv’s estimate of $ 2.60. Sales of $ 19.3 billion exceeded the estimate of $ 18.8 billion.
Citigroup announced it released $ 3.9 billion in credit risk reserves during the quarter, resulting in a profit of $ 2.06 billion after loan losses of $ 1.75 billion for the period. Analysts had expected a provision of $ 393.4 million for the quarter.
The bank announced that it is ending its consumer activities in Australia, Bahrain, China, India, Indonesia, Korea, Malaysia, the Philippines, Poland, Russia, Taiwan, Thailand and Vietnam. According to Fraser, there are plans to focus non-US consumer banking in Singapore, Hong Kong, the United Arab Emirates and London – places with a high concentration of wealth.
“Because of the constant updating of our strategy, we have decided to double the wealth,” said Fraser in the press release. The focus on the remaining markets “enables us to capture the strong growth and attractive returns of the wealth management business through these key hubs.”
Citigroup lacked the scale to properly compete in the 13 markets it was leaving, she said. Investment banking will continue in markets where the company is leaving the consumer business, the bank said.
Here’s what Wall Street expected:
Earnings: $ 2.60 per share, 147% higher than the same period last year, according to Refinitiv.
Revenue: $ 18.8 billion, down 9.2% from a year earlier.
Net interest margin: 1.99%
Trading Revenue: Fixed Income $ 4.43 billion, equities $ 1.16 billion
Jane Fraser, CEO of Citigroup, is ready for the limelight.
Fraser, who officially became CEO in February, reports on the first quarter results at the top of the third largest US bank in the country.
Like the rest of the industry, Citigroup is expected to release some of the money it previously allocated for expected outages related to the coronavirus pandemic. The company, which has sizable bond trading operations, could also see a boost from the trading counters in the quarter.
Analysts will be excited to hear about Fraser’s vision for the bank, as well as details of their plan to appease regulators who have criticized the company’s risk management controls.
On Wednesday, JPMorgan Chase and Wells Fargo released results that exceeded analysts’ expectations for reserves disclosure, while Goldman Sachs outperformed estimates for strong advisory and trading results.
Citigroup’s shares are up 18% so far this year, compared to the KBW Bank Index’s 26% increase.
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