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Investment Banking Propels Citigroup's Fourth-Quarter Profit — 3rd Update

By David Benoit 

Citigroup Inc. said fourth-quarter profit rose 15%, beating expectations on a surge in investment-banking operations.

The New York bank posted profit of $4.98 billion, or $2.15 a share. That included a per-share gain of 25 cents thanks to a tax-related boost, but even without that gain the bank would have beaten the $1.81 a share expected by analysts polled by FactSet. A year ago, Citigroup earned $4.31 billion, or $1.64 a share.

Revenue climbed 7% to $18.38 billion, above the $17.9 billion analysts had expected.

The gains were broad-based across its businesses, with the consumer operations boosted by increased deposits and credit-card use and the investment bank surging from a weak year-ago period. They helped propel Citigroup above a promised profitability target, which analysts had expected it to miss.

The bank's return on tangible common equity, which measures the profitability of its assets, was 12.1% for the full year, better than the 12% Citigroup had targeted.

Chief Financial Officer Mark Mason told reporters the returns were proving Citigroup's strategy that it can grow by increasing its revenue from current customers.

Still, the bank lowered its 2020 return target to the range of 12% to 13%, from the 13.5% it had been targeting.

Mr. Mason reiterated what he has said in recent months, that the economy is different from what Citigroup expected it would be when it set the 2020 target. The new target is still above the 11.9% that analysts have been forecasting.

Chief Executive Michael Corbat again said the bank is making important progress on profits and that he wouldn't sacrifice investments in the business to hit a few targets.

"We continue to invest in areas where we see opportunities for client growth and in our infrastructure, in light of the enduring need to be an indisputably strong and stable institution," Mr. Corbat said.

Mr. Mason said he expected "modest" revenue growth and flat expenses for 2020.

For the full year, Citigroup revenue rose 2% to $74.29 billion and profit rose 8% to $19.47 billion.

Citigroup's stock climbed more than 50% in 2019, outpacing rivals in the KBW Nasdaq Bank Index and the broader market. Still, it trades at lower valuations than peers, which analysts have blamed on lower returns than the industry.

The shares rose 2.6% to $82.77 in midday trading, picking up speed after the new return target was announced on the company's call.

In the consumer-banking business, revenue increased 5% to $8.46 billion in the fourth quarter and profit rose 12% to $1.58 billion.

Revenue rose in both card offerings and retail banking, and consumer deposits were up 7%. Citigroup set aside $2 billion, up 8%, to handle potentially souring consumer loans.

The corporate bank's revenue and profit both rose 10%, to $9.38 billion and $2.88 billion, respectively.

Revenue from investment banking rose 6%, proving a surprise from the flat forecast that Mr. Mason gave only in December. Its equity-underwriting business led the gain, up 33%, boosted by work on some big public offerings such as Alibaba Group Holding Ltd.'s Hong Kong listing and Saudi Arabia's record-breaking Aramco initial public offering. Its business advising clients on mergers and acquisitions fell 19%.

Total trading revenue was up 31%, benefiting from the easy comparison. Year-ago results were hampered by dismal trading across the industry, particularly in bonds, when market turmoil dried up volume. Revenue in fixed-income trading jumped 49%.

That more than offset a weak period for equities trading, which fell 23%. Citigroup has been investing in building a bigger equities trading division but has been buffeted by a shrinking industry. Executives, though, reiterated support for the business.

"We're certainly not where we want to be and not where this ends," Mr. Corbat said.

Revenue from the treasury and trade solutions unit, which helps companies manage money around the globe, rose 2% to $2.61 billion. The business has benefited as companies seek to maneuver their supply chains to keep pace with global trade fights.

Across the company, Citigroup's North America revenue rose 7% while it had big gains in Asia, rising 10%.

Write to David Benoit at


(END) Dow Jones Newswires

January 14, 2020 14:17 ET (19:17 GMT)

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