Daily Management Review

Citi Group Beats Market Estimates; Predicts More Revenue From Lending In 2019


01/15/2019




Citi Group Beats Market Estimates; Predicts More Revenue From Lending In 2019
Reporting better than expected fourth-quarter results, Citigroup Inc announced that 2019 would be a better year for the bank compared to 2018 as it expects to earn $2 billion more in revenue from its lending activities. This announcement saw its shares rise by 4 per cent.
 
The drivers for the net interest income this year would be a reduction in government surcharge for deposit insurance and increasing revenues from its consumer banking business, said Chief Financial Officer John Gerspach.
 
He said that in the broader perspective, there would be strength in the U.S. economy and good performance of global economies. The banks performance was not being hurt by the slower economic growth in China he also noted.
 
“Take a look at the U.S. Unemployment is at virtually all-time lows, wages are moving forward, consumer confidence remains high,” he said on an earnings call.
 
A drop in revenues for the fourth quarter of last year was offset by lower expenses which helped the bank to post better than expected results for the quarter. The drop in revenue was because of volatility in its fixed-income trading business which happened during the end of 2018.
 
While accepting that the partial U.S. shutdown had not yet affected its business, Citi officials however said that there can be an impact if the impasse was a prolonged one.
 
In the quarter ended Dec. 31, quarterly profit rose to $4.2 billion, or $1.61 a share, excluding a one-time tax related gain. The figure for the same period a year earlier was $3.7 billion, or $1.28 a share. According to IBES data from Refinitiv, a profit of $1.55 per share was expected by analysts.
 
The shares of the third-largest U.S. bank rose by 4.5 per cent at $59.23 \following the announcement. This was despite the bank reporting a 21 per cent drop in the markets and securities business revenues of the bank in the fourth quarter. 
 
The drop was accorded to widening credit spreads and the market correction in December.
 
During market movements, those banks that have large trading businesses are benefited because such movement spurs customers to buy and sell securities. However when the movement is sudden, it can create damages as customers could be prodded to avoid trading and impact the capacity of the banks to hedge their own exposure to the market.
 
There was an overall drop of 2 per cent in the revenues of Citi at $17.1 billion which was lower than market expectations of $17.6 billion as predicted by IBES data from Refinitiv.
 
The lagging market revenue forced the bank to reduced compensation costs, Citi said and added that there was a year-on-year drop of 4 per cent in the overall expenses.
 
Corporate and investor clients “remained on the sidelines, waiting for some clearer market conditions” for large part of the fourth quarter in its fixed-income markets, said Citi CFO Gerspach.
 
(Source:www.rte.ie)






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