Citigroup beats by $0.15, beats on revs
Reports Q1 (Mar) earnings of $1.30 per share, $0.15 better than the Capital IQ Consensus Estimate of $1.15; revenues fell 0.6% year/year to $20.12 bln vs the $19.46 bln consensus. CVA/DVA was $7 million ($4 million after-tax) in Q1, compared to negative $319 million (negative $198 million after-tax) in the prior year period. Excluding CVA/DVA, first quarter revenues of $20.1 billion were down 2% from the prior year period. Excluding CVA/DVA and the tax item, first quarter 2014 earnings were $1.30 per diluted share, representing a 1% increase y/y.
Citigroup
Citigroup
- Citigroup revenues of $20.1 billion in Q1 declined 1% from the prior year period. Excluding CVA/DVA in both periods, revenues declined 2% y/y. This decrease was driven by a 5% decline in Citicorp revenues, primarily due to a decline in Fixed Income Markets revenues in Institutional Clients Group (ICG) and lower U.S. mortgage refinancing activity in North America Global Consumer Banking (GCB), which was partially offset by higher Citi Holdings revenues.
- Citigroup's net income rose to $3.9 billion in Q1 from $3.8 billion in the prior year period. Driven by lower expenses and lower net credit losses, partially offset by the lower revenues and a higher effective tax rate.
- Operating expenses of $12.1 billion were 1% lower y/y. Operating expenses in Q1 included $945 million of legal and related expenses, compared to $710 million in the prior year period, and $211 million of repositioning charges, compared to $148 million in the prior year period. Citigroup's cost of credit in the first quarter 2014 was $2.0 billion, a decrease of 20% y/y due to improvement in net credit losses.
- Citigroup's allowance for loan losses was $18.9 billion at quarter end, or 2.87% of total loans, compared to $23.7 billion, or 3.70% of total loans in prior year.
- As of quarter end, book value per share was $66.25 and tangible book value per share was $56.40, 6% and 8% increases, respectively y/y. Citigroup's estimated Basel III Tier 1 Common ratio was 10.4%, up from 9.3% in the prior year period, driven by growth in retained earnings and deferred tax asset (DTA) utilization, partially offset by an increase in risk-weighted assets. C added approximately $56 billion of operational RWA as part of its transition to Basel III "advanced approaches" effective in 2Q14.
- Citicorp revenues of $18.7 billion in Q1 declined 3% y/y. Corporate/Other revenues were $141 million versus $6 million in the prior year period.
- Citicorp net income decreased 8% y/y to $4.2 billion.
- Citicorp operating expenses decreased 2% from the prior year period to $10.6 billion primarily reflecting efficiency savings, partially offset by higher regulatory and compliance costs, legal and related expenses and repositioning charges in the current quarter. Citicorp cost of credit of $1.6 billion in Q1 declined 4% y/y. The decline reflected both a 1% decline in net credit losses as well as a higher net loan loss reserve release, which increased 10% y/y.
- GCB revenues of $9.3 billion declined 5% from the prior year period, as significantly lower U.S. mortgage refinancing activity and continued spread compression globally more than offset the impact of the Best Buy portfolio acquisition and ongoing volume growth in most international businesses.
- North America- GCB revenues declined 6% to $4.8 billion versus the prior year period driven mainly by lower retail banking revenues, partially offset by higher retail services revenues. Citi-branded cards revenues were roughly flat versus the prior year period at $2.0 billion, reflecting improvement in net interest spreads and growth in purchase sales, offset by a 3% decline in average loans.
- International GCB revenues declined 3% versus the first quarter 2013 to $4.5 billion on a reported basis. On a constant dollar basis, international GCB revenues were up 3% versus the first quarter 2013 driven by growth in Latin America and Asia, partially offset by a decline in EMEA. International GCB net income declined 6% from the prior year period to $700 million on a reported basis and declined 2% in constant dollars. On a constant dollar basis, higher expenses and higher credit costs more than offset the higher revenues.
- Citi Holdings revenues in the first quarter 2014 increased 61% versus the prior year period to $1.5 billion. Revenues in the first quarter 2014 included CVA/DVA of $14 million (compared to negative $9 million in the prior year period). Excluding CVA/DVA, Citi Holdings revenues increased 58% to $1.4 billion primarily driven by the absence of repurchase reserve builds for representation and warranty claims in the first quarter 2014, as well as higher levels of mark-to-market gains, lower funding costs versus the prior year period and a one-time gain on a debt transaction. As of the end of the quarter, total Citi Holdings assets were $114 billion, 23% below the prior year period, and represented approximately 6% of total Citigroup assets. Citi Holdings net loss was $284 million in the first quarter 2014 compared to a net loss of $804 million in the prior year period, driven by the higher revenues and lower net credit losses.
- Banking revenues of $4.1 billion increased 1% from the prior year period, primarily reflecting growth in Corporate Lending and Private Bank revenues, partially offset by lower Investment Banking revenues. Investment Banking revenues decreased 10% versus the prior year period, driven by a 19% decline in debt underwriting revenues to $578 million and a 14% decline in advisory revenues to $175 million, partially offset by 20% growth in equity underwriting revenues to $299 million. Private Bank revenues increased 6% to $668 million from the prior year period (excluding $3 million of CVA/DVA, versus negative $1 million in the first quarter 2013), driven by growth in investments and capital markets products. Corporate Lending revenues increased 28% to $398 million, including $17 million of mark-to-market losses on hedges related to accrual loans compared to a $24 million loss in the prior year period. Corporate Lending revenues rose 24% versus the prior year period to $415 million as higher loan balances and lower funding costs were partially offset by lower loan yields. Treasury and Trade Solutions revenues increased 1% versus the prior year period as growth in fees and volumes were partially offset by the ongoing impact of spread compression globally.
- Markets and Securities Services revenues of $5.2 billion (excluding negative $10 million of CVA/DVA, versus negative $309 million in the first quarter 2013) declined 12% from the prior year period. Fixed Income Markets revenues of $3.9 billion in the first quarter 2014 (excluding negative $26 million of CVA/DVA) declined 18% from the prior year period, reflecting the uncertain global macro environment as well as strong performance in the prior year in securitized products and local markets rates and currencies. Equity Markets revenues of $883 million (excluding $16 million of CVA/DVA) were up 13% versus the prior year period, driven by improved derivatives revenues.