Citigroup misses by $0.16, misses on revs
Reports Q4 (Dec) earnings of $0.82 per share, excluding non-recurring items, $0.16 worse than the Capital IQ Consensus Estimate of $0.98; revenues fell 0.8% year/year to $17.78 bln vs the $18.19 bln consensus.
- CVA/DVA was a negative $164 million ($100 million after-tax) in Q4, mainly resulting from the improvement in Citigroup's credit spreads, compared to negative $485 million ($301 million after-tax) in the prior year period.
- Lower revenues in Citicorp primarily due to lower U.S. mortgage refinancing activity in North America Global Consumer Banking (GCB) and a decline in fixed income markets revenues in Securities & Banking.
- Citigroup's net income increased to $2.7 billion in Q4 from $1.2 billion in the prior year.
- Operating expenses of $11.9 billion were 13% lower than the prior year period and declined by 6% excluding the fourth quarter 2012 repositioning charge, driven by efficiency savings, the decline in Citi Holdings assets and lower legal and related expenses, partially offset by higher volume-related expenses and repositioning charges in the current quarter.
- Operating expenses in the fourth quarter 2013 included $809 million in legal and related expenses compared to $1.3 billion in the prior year period.
- Citigroup's allowance for loan losses was $19.6 billion at year end, or 2.97% of total loans, compared to $25.5 billion, or 3.92% of total loans, in the prior year period. The $670 million net release of loan loss reserves in the quarter compared to a $91 million release in the prior year period, primarily driven by Citi Holdings which recorded a reserve release of $540 million in the fourth quarter 2013, compared to a net reserve build of $51 million in the prior year period.
- Citigroup's capital levels and book value per share increased during 2013. As of quarter end, book value per share was $65.31 and tangible book value per share was $55.38, 6% and 8% increases respectively versus the prior year period. At quarter end, Citigroup's estimated Basel III Tier 1 Common Ratio was 10.5%, up from 8.7% in the prior year period, mostly driven by retained earnings and deferred tax asset (DTA) utilization. Citigroup's estimated Basel III Supplementary Leverage Ratio for the fourth quarter 2013 was 5.4%.
- Citicorp revenues of $16.5 billion declined by 2% y/y. Net income increased to $3.1 billion in Q4 from $2.2 billion in prior year. Citicorp operating expenses decreased 14% year-over-year to $10.5 billion.
- Global Consumer Banking
- GCB revenues of $9.5 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. GCB net income declined 5% y/yn, reflecting the decline in revenues, lower loan loss reserve releases and a higher effective tax rate, partially offset by lower operating expenses and lower net credit losses.
- Operating expenses of $5.2 billion declined 10% y/y, reflecting lower legal and related expenses and efficiency savings, partially offset by repositioning charges in the current quarter.
- Citi retail services revenues increased 9% to $1.7 billion, primarily reflecting the impact of the Best Buy portfolio acquisition, partially offset by lower spreads and higher contractual partner share payments due to the impact of improving credit trends.
- International GCB revenues grew 2% to $4.6 billion on a constant dollar basis. Revenues in Latin America grew 8% to $2.4 billion, as volume growth more than offset spread compression, partially offset by a 3% decline in Asia to $1.8 billion, driven by regulatory changes, the continued impact of spread compression and the repositioning of the franchise in Korea, and a 6% decline in EMEA to $358 million, primarily due to previously-announced market exits over the past year.
- Securities and Banking revenues increased 2% from the prior year period to $4.5 billion. Excluding the impact of the negative $165 million of CVA/DVA in the fourth quarter 2013 (compared to negative $510 million in the prior year period), Securities and Banking revenues were $4.6 billion, 5% lower than the prior year period, driven by a decline in fixed income markets revenues.
- Investment banking revenues of $1.0 billion increased 3% versus the prior year period.
- Equity underwriting revenues increased 73% to $282 million and advisory increased 29% to $266 million, partially offset by a 23% decline in debt underwriting revenues to $488 million.
- Fixed income markets revenues of $2.3 billion in the fourth quarter 2013 decreased 15% from the prior year period, reflecting a more challenging trading environment and the absence of strong fourth quarter 2012 revenues in the Citi Capital Advisors business, which Citi continues to wind down.
- Citi Holdings revenues in the fourth quarter 2013 increased 22% versus the prior year period to $1.3 billion. As of the end of Q4, total Citi Holdings assets were $117 billion, 25% below the prior year period, and represented approximately 6% of total Citigroup assets. Citi Holdings net loss was $422 in Q4 compared to a loss of $1.0 billion in the prior year period, primarily reflecting lower credit costs. Operating expenses declined 8% from the prior year period. Citi Holdings cost of credit declined 71% to $338 million versus the prior year period primarily driven by a net loan loss reserve release of $540 million in the fourth quarter 2013, compared to a net reserve build of $51 million in the prior year period.