Revenues fall at Citigroup as costs rise

CITIGROUP yesterday revealed a slump in revenues and profits in its quarterly results compared to last year, emphasising the bank’s ongoing fight to rein in its backlog of struggling consumer business lines.

Revenues dropped 22 per cent year-on-year to $19.7bn (£12.1bn), but the figure was a seven per cent improvement on the fourth-quarter of 2010.

Its cards business and retail banking lost 15 per cent of revenues and seven per cent of sales compared to last year.

Costs in the group’s core business rose for the third consecutive quarter to $9.6bn, despite a fall in credit costs, with the bank blaming “higher spending on marketing and technology” in North America. Compensation and benefits costs rose four per cent to $6.16bn.

The bank tried to sell an optimistic, high-growth story to investors in its presentation for analysts, highlighting that “emerging markets represented over 50 per cent of Citicorp’s earnings before tax”.

But the figures show that the Citicorp division’s pre-tax profits from developing economies increased only slightly from $2.9bn to $3.2bn. Instead, recovery in pre-tax profits in advanced economies fuelled the improvement at the end of 2010, jumping from $1bn to $2.9bn.

Citi Holdings, the group’s non-core division, continued steady progress in shrinking its balance sheet, with assets decreasing by 6.2 per cent on the previous quarter to $337bn.

In total, Citigroup plans to sell $12.7bn of bad assets, such as subprime loans and mortgage-backed securities, which it said carried a “disproportionately high” risk weighting under the new Basel III capital rules.

FAST FACTS | US BANK RESULTS SO FAR

JP Morgan Chase kicked off the first-quarter reporting season last Wednesday with a dramatic recovery in earnings compared to the start of 2010. Pre-tax profits jumped 78 per cent to $8.06bn (£4.95bn).

The investment bank recorded its second most profitable quarter ever, with fees revenue up 23 per cent on the first-quarter of 2010 at $1.79bn.

The retail bank saw earnings drop, but still made money, with pre-tax profit coming in at $1.49bn.

JP Morgan Chase was the first bank to estimate its core tier one capital ratio under stringent Basel III?rules, putting it at 7.3 per cent, above the overall minimum but likely below the 10 per cent minimum for systemically important financial institutions.

Earnings per share came in at $1.28, at the high end of analysts’ expectations.
Bank of America Merrill Lynch (BAML) was next, reporting last Friday. It posted a surprisingly sharp drop in first-quarter profits as home foreclosures hit its mortgage business.

Despite making a profit of $2bn (£1.23bn), BAML, the largest US bank, lost a staggering $2.39bn on its portfolio of home loans.

Income in the bank's retail division fell 49 per cent as service charges plunged, though deposits were up.

Investment bank revenue and profit also fell from last year’s record quarter. Sales and trading revenue was down 30 per cent, but overall investment banking income was up 24 per cent.

Earnings per share came in at the low end of analysts’ expectations at $0.17.