CITIGROUP revealed an 11 per cent collapse in fourth quarter profits yesterday in an earnings report that fell well short of expectations and sent the bank’s shares tumbling 8.1 per cent.
The bank posted its lowest revenues since 2008, a year so bad that it led to a rescue by the Federal Reserve.
Annual revenues fell 10 per cent on 2010 to $78.4bn (£51.1bn), although the fourth quarter of last year was marginally better, with revenues shrinking seven per cent to $17.2bn.
Underlining the turmoil engulfing the industry, the decline was in large part due to the securities and banking division – Citi’s investment bank – where quarterly revenues have fallen by a tenth to $3.2bn.
The money it makes from capital markets work, in particular, has fallen through the floor: equity underwriting revenues dropped 78 per cent to $90m in the fourth quarter of last year and debt underwriting fell by nearly a third to $389m.
Chief financial officer John Gerspach said: “The operating environment continues to be extraordinarily challenging in a number of businesses, none more so than securities and banking.”
Citi Holdings, its non-core portfolio, also dragged down the bottom line as quarterly revenues tumbled by 30 per cent to $2.8bn. The worst hit was from its “special asset pool” – a hangover of toxic loans made before the financial crisis – where profits dropped by half to $596m.
By contrast, quarterly revenues in its retail division edged up by one per cent to $8.2bn.
The bank is trying to bear down on costs and has promised around 5,000 lay-offs, which chief executive Vikram Pandit revealed has cost $400m in redundancy pay-outs during the fourth quarter.
The results are a bad portent for Wall Street, with JP Morgan Chase having disappointed on Friday and Goldman Sachs due to report today. But a source said that Goldman could avoid cutting bonuses by the mooted 50 per cent and instead cut 20-40 per cent.