Citigroup reports Q3 (Sep) results, misses on revs
Reports Q3 (Sep) earnings of $1.02 per share, may not be comparable to the Capital IQ Consensus Estimate of $1.03;C reported net income for Q3 of $3.2 billion, or $1.00 per diluted share, on revenues of $17.9 billion. This compared to net income of $468 mln, or $0.15 per diluted share, on revenues of $13.7 billion for 3Q12. CVA/DVA was a negative $336 million in Q3 resulting from the tightening of Citi's credit spreads in the quarter, compared to a negative $776 million in the prior year period. Third quarter 2013 results also included a $176 million tax benefit related to the resolution of certain tax audit items, compared to a $582 million tax benefit in the prior year period; Revenues fell 7.8% year/year to $17.88 bln vs the $18.8 bln consensus. •Michael Corbat, Chief Executive Officer of Citi, said, "We performed relatively well in this challenging, uneven macro environment. While many of the factors which influence our revenues are not within our full control, we certainly can control our costs and I am pleased with our expense discipline and improved efficiency year-to-date. Citicorp •Citicorp revenues of $16.6 billion in Q3 included a negative $332 million of CVA/DVA reported within Securities and Banking. Excluding CVA/DVA, Citicorp revenues of $17.0 billion decreased 7% from the prior year period. Securities and Banking revenues declined 2%, or 10% excluding CVA/DVA, and Global Consumer Banking (GCB) revenues declined 7%, while Transaction Services (CTS) revenues were roughly flat, all versus the prior year period. Citi Holdings •Citi Holdings revenues of $1.3 billion in the third quarter 2013 included a negative $4 million of CVA/DVA. Excluding CVA/DVA and the third quarter 2012 MSSB loss, Citi Holdings revenues increased 28% versus the prior year period, mainly driven by the absence of repurchase reserve builds for representations and warranty claims in the third quarter 2013. Total Citi Holdings assets of $122 billion declined $49 billion, or 29%, from the third quarter 2012. Citi Holdings assets at the end of the third quarter 2013 represented approximately 6% of total Citigroup assets. Citigroup's net income increased to $3.2 billion in the third quarter 2013 from $468 million in the prior year period. Excluding CVA/DVA and the tax benefit in both periods, as well as the third quarter 2012 MSSB loss, Citigroup net income of $3.3 billion was roughly flat compared to the prior year period, as lower operating expenses and lower credit costs were offset by the decline in revenues and a higher tax rate.
Operating expenses of $11.7 billion were 4% lower than the prior year period. Citigroup's cost of credit in the third quarter 2013 was $2.0 billion, 25% below the prior year period, reflecting a $1.5 billion improvement in net credit losses partially offset by a $827 million decline in net loan loss reserve releases.
Citigroup's capital levels and book value increased versus the prior year period. As of the quarter end, book value per share was $64.49 and tangible book value per share was $54.52, 1% and 3% increases respectively versus the prior year period. At quarter end, Citigroup's Basel I Tier 1 Capital Ratio was 13.6% and its Tier 1 Common Ratio was 12.6%, while its Basel III Tier 1 Common Ratio was estimated at 10.4%. Citigroup's estimated Basel III Supplementary Leverage Ratio for the third quarter 2013 was 5.1%.
Global Consumer Banking •GCB revenues of $9.2 billion declined 7% from the prior year period, as significantly lower U.S. mortgage refinancing activity and continued spread compression globally more than offset the ongoing volume growth in most international businesses. Revenues declined 12% in North America GCB to $4.7 billion, while international GCB revenues declined 1% to $4.5 billion on a reported basis (grew 2% on a constant dollar basis). GCB net income declined 23% versus the prior year period to $1.6 billion, reflecting the decline in revenues and lower loan loss reserve releases, partially offset by lower operating expenses and lower net credit losses. Operating expenses of $5.0 billion declined 4% versus the prior year period due to lower legal and related expenses in North America and repositioning savings. Total credit costs increased 14% compared to the prior period, driven by lower loan loss reserve releases in the North America cards business and reserve builds in international GCB, which were partially offset by lower net credit losses. Securities and Banking • Securities and Banking revenues declined 2% from the prior year period to $4.7 billion. Excluding the impact of the negative $332 million of CVA/DVA in the third quarter 2013 (compared to a negative $799 million impact in the prior year period), Securities and Banking revenues were $5.1 billion, 10% lower than the prior year period. • Investment Banking revenues of $839 million were 10% below the prior year period, driven primarily by declines in debt underwriting and advisory revenues, partially offset by growth in equity underwriting. Debt underwriting revenues declined 16% to $498 million and advisory revenues declined 15% to $167 million, while equity underwriting revenues increased 22% to $174 million. • Equity Markets revenues of $710 million in the third quarter 2013 (excluding a negative $39 million of CVA/DVA) were 36% above the prior year period, reflecting market share gains as well as improved derivatives performance. • Fixed Income revenues of $2.8 billion in the third quarter 2013 (excluding a negative $287 million of CVA/DVA) decreased 26% from the prior year period, reflecting lower volumes and a more uncertain macro environment. Lending revenues increased 38% to $230 million from the prior year period, mostly reflecting lower losses on hedges related to accrual loans of $147 million (compared to a $252 million loss in the third quarter 2012) as credit spreads tightened less significantly during the third quarter 2013 compared to the prior year. • Securities and Banking net income was $989 million in the third quarter 2013, down 16% from the prior year period. Excluding CVA/DVA, net income declined 29% to $1.2 billion from the prior year period, primarily reflecting the lower revenues and higher credit costs, driven by loan loss reserve builds, partially offset by a 3% decline in operating expenses, reflecting the impact of headcount reductions and lower performance-based compensation.