Citi's Corbat tempers investor expectations in debut
By David Henry
NEW YORK (Reuters) - Mike Corbat, Citigroup Inc's (C.N: Quote) new CEO, used his earnings debut to temper investor expectations for a turnaround at the company, delivering subdued profits and saying the bank still had a lot left to clean up.
Corbat, who took over as chief executive in October after the board abruptly ousted Vikram Pandit, promised investors the third-largest U.S. bank will do a better job for shareholders during his tenure. But he warned that the environment remained challenging and it would take time.
Citigroup's fourth-quarter profit missed Wall Street's expectations by a wide margin, even though earnings were up from a year earlier as trading revenue rebounded. The bank's shares fell 2.9 percent for the day.
The bank took $2.32 billion of charges for layoffs and lawsuits in the fourth quarter. It also declined to release loan loss reserves just yet, a step which would have boosted profits.
Pandit was still in the job when the fourth quarter started, and some analysts said that by not releasing reserves Corbat may have understated financial results.
"It may be that the new CEO is holding back," said Gary Townsend, president of hedge fund Hill-Townsend Capital LLC. "There's no reason that the quarter when Pandit left and (Corbat) came in should be great."
Citigroup declined to comment on whether that was its strategy.
But analysts on the conference call repeatedly challenged Chief Financial Officer John Gerspach on why the company did not draw down more of its loan loss reserves, particularly those for mortgage assets, whose value is being lifted by the stronger housing market. Continued...