Citi profit disappoints as bond trading revenue drops

Thu Jan 16, 2014 11:09am EST
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By David Henry and Tanya Agrawal

(Reuters) - Citigroup Inc (C.N: Quote) posted weaker-than-expected quarterly results on Thursday, as lackluster bond-trading results weighed on overall revenue.

The third-largest U.S. bank said its fixed-income revenue fell 15 percent to $2.33 billion in the fourth quarter from the same quarter last year, in what it called a "challenging trading environment." The bond trading results lagged rivals' including Bank of America Corp (BAC.N: Quote) and JPMorgan Chase & Co. (JPM.N: Quote)

The bank still posted rising profit, helped by cost-cutting, but the size of the decline in bond trading revenue surprised many analysts. Much of the drop came from falling client activity in corporate bonds and secured debt, said Jon Gerspach, chief financial officer, on a conference call with reporters. Rising bond yields have cut into demand for issuing and trading corporate debt.

"We just saw a fall-off in client volumes," Gerspach said. When asked if there was any explanation, he responded, "No, it's just what we saw."

Citigroup's fourth-quarter adjusted net income rose to $2.60 billion, or 82 cents per share, from $2.15 billion, or 69 cents per share, a year earlier, the bank said. The adjusted results strip out items including costs associated with layoffs and restructuring, and accounting adjustments linked to changes in the value of the company's debt.

Analysts on average expected earnings of 95 cents per share, according to Thomson Reuters I/B/E/S. The average estimate came down 10 cents in the last two weeks, partly in expectation of weak fixed-income market revenue.

"Although we didn't finish the year as strongly as we would have liked, we made substantial progress toward our key priorities in 2013," Chief Executive Michael Corbat said in a statement.

The results reflect the difficulties that Corbat faces as he tries to turn around the third largest U.S. bank. He took the reins of the bank in October 2012, after directors pushed out Vikram Pandit, and has been trying to lower costs while boosting revenue.   Continued...

The Citibank logo is seen at branch in Washington April 18, 2011. REUTERS/Larry Downing