Citigroup reported 4Q18 results on Monday (14 January), with the bank earning $1.61/share excluding one-time impacts of the US tax overhaul and beating the Refinitiv consensus analysts’ expectation of $1.55/share. The earnings beat was also above the $1.28 EPS recorded in 4Q17 and was achieved with the help of a 4% YoY cut in costs, led by a 6% YoY drop in compensation. However, overall revenue fell 2% YoY to $17.1bn (from $17.5bn) – below the Refinitiv consensus forecast of $17.6bn. This, as bond trading revenue declined amid a difficult December for markets (fixed-income and markets revenue dropped 21% YoY to $1.94bn as trading conditions deteriorated after the company gave guidance in early December, accounting for the lion’s share of the firm’s revenue shortfall). Revenue from consumer banking was flat at $8.44bn as retail lending and North American Citi-branded card revenue were flat. Equity markets revenue grew 18% YoY to $668mn, while investment banking revenue dipped 1% YoY to $1.3bn and private bank revenue grew 3% YoY to $797mn. Operating expenses fell 4% YoY to $9.89bn, driven in part by lower compensation costs.
Its revenue shortfall also meant that Citi missed a performance target by more than expected – operating efficiency for the year improved 86 bpts to 57.4% but it missed the 100-bpt target the bank gave earlier in 2018. However, it did meet expectations for overall returns – Citigroup generated a 10.9% return on tangible capital (RoTC), exceeding its 10.5% target.
Citigroup’s allowance for loan losses was 1.81% of the bank’s total loans, vs 1.86% in 4Q17, while company-wide loans rose 3% YoY to $684bn.
CEO Michael Corbat said in the earnings release that the volatile fourth quarter “impacted some of our market-sensitive businesses,” but added that management “remain committed” to delivering on their 2019 targets.