Citigroup beats analysts’ earnings estimates because the financial institution releases cash for mortgage losses

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 posted results that exceeded analysts’ earnings estimates in the fourth quarter as it partnered with rival JPMorgan Chase to build reserves for credit losses.

Citigroup announced Friday that earnings were down 7% to $ 4.63 billion, or $ 2.08 per share, compared to the estimate of $ 1.34 per share by analysts surveyed by Refinitiv. Company-wide revenue declined 10% to $ 16.5 billion, below the estimate of $ 16.7 billion.

The bank released $ 1.5 billion in reserves for loan losses, a move larger than analysts expected. That compares with a reserve build-up of $ 436 million in the third quarter and $ 253 million a year ago. As a result, borrowing costs for the period were more than $ 2 billion lower than a year ago.

“As a sign of the strength and longevity of our diversified franchise, our sales remained unchanged through 2019 despite the massive economic impact of COVID-19,” said CEO Mike Corbat in the press release.

Citigroup made history when it announced that Jane Fraser would take over the running of the business. This made it the first major Wall Street bank to be run by a woman. Now, weeks before taking on Corbat, Fraser is expected to speak to investors and analysts for the first time on Friday. Shareholders are excited to see how Fraser, a former McKinsey partner who ran the bank’s Latin American operations before becoming president in 2019, will improve the company’s returns.

Citigroup, the third largest US bank by assets, was hurt by relatively poor performance when compared to competitors such as JPMorgan Chase. These results have frustrated investors like the activist hedge fund ValueAct. The bank is also working on a government agency agreement to improve its internal risk controls after it accidentally sent nearly $ 900 million to Revlon lenders last year.

Citigroup has announced that trading revenues will increase 15% year over year in the fourth quarter, while investment banking fees should increase 10% to 15%.

The shares of the New York-based bank fell 23% last year, compared with the KBW Bank Index’s 4.3% decline.

Here are the numbers:

  • Earnings: $ 2.08 per share versus $ 1.34 per share for analysts surveyed by Refinitiv.
  • Revenue: $ 16.5 billion versus an estimate of $ 16.7 billion.

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