Citigroup reports steep drop in 4th-quarter earnings as operating expenses pile up

• Citigroup reported $3.2 billion in net income for its fourth quarter, down 26% from a year ago.
• The bank earned $1.46 a share, lower than an estimated $1.62 a share.
• Operating expenses increased 18% year on year.
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Citigroup on Friday reported a 26% year-over-year drop in fourth-quarter net income to $3.2 billion as higher revenues were more than offset by rising expenses from the divestiture of its banking businesses in Asia.  

The third-largest bank in the US said operating expenses increased 18% year on year to $13.5 billion. Excluding the impact of Asia divestitures, expenses increased 8%.

Shares of Citigroup slipped by 2.5% as of 9:50 a.m. ET in New York, after losing 4% in premarket trading.

Here are the key numbers:

Revenue: $17 billion, versus Bloomberg’s estimate of $16.8 billion.

Earnings per share: $1.46 per share, versus Bloomberg’s estimate of $1.62.

Investment banking revenue increased by 43% to $1.8 billion, beating Bloomberg’s $1.63 billion estimate. But trading revenue slipped.

For all of 2021, Citigroup reported $22 billion in net income, double the $11 billion earned in 2020. But revenue slipped to $71.9 billion from $75.5 billion in prior year.

“We had a decent end to 2021 driving net income for the year up to $22 billion in what was a far better credit environment than the previous year,” said Citi CEO Jane Fraser, who took the helm in March 2021, in the company’s earnings report.

She added that Citi returned nearly $12 billion of capital to shareholders, and tangible book value, the measure of a bank’s worth if liquidated, increased 7% during the year.

Citigroup recently revealed plans to sell its consumer-banking franchises in less profitable markets in Asia and Europe — such as Indonesia, Malaysia, Thailand, and Vietnam — to free up resources to “double down in wealth, and focus on our higher-returning institutional businesses,” according to Mark Mason, Citibank’s CFO. 

The bank also said it plans to divest its consumer, small business, and middle-market banking businesses in Mexico.

Citigroup’s report helped kick off the fourth-quarter earnings season for corporations, which will help shed light on how well businesses are faring amid the surging cases of COVID-19.

JPMorgan and Wells Fargo also reported their earnings on Friday. Goldman Sachs reports early Tuesday, while Bank of America and Morgan Stanley report Wednesday before the market open.