Citi profit plunges on legal settlements and fall in bond revenue

Thu Jan 15, 2015 1:03pm EST
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By Tanya Agrawal and David Henry

(Reuters) - Citigroup Inc said its quarterly profit dropped 86 percent, hurt by legal settlements and falling bond trading revenue, sending the bank's shares down more than 4 percent.

The bank took $3.5 billion of charges for legal settlements, matching the figures foreshadowed by Chief Executive Michael Corbat in December. But a 16 percent drop in fixed-income trading revenue was steeper than many analysts had expected, and earnings fell short of analysts' estimates.

Citi suffered on a number of fronts during the quarter. The bank, which gets about half of its revenue from overseas, took a hit from the strong dollar, for example. The bank also posted a loss from assets it took on before the financial crisis.

The profit setback comes as the Federal Reserve considers the bank's plan to return capital to shareholders, through some combination of share buybacks and dividends.

Corbat and Chief Financial Officer John Gerspach expressed optimism that the Fed would approve the bank's capital plan.

An earlier plan was rejected due to concerns about the processes Citi uses to determine how its business would be hit by stressful situations.

"I feel good about our submission," Corbat said on a call with analysts, adding that he was looking for "an unqualified pass" from the Fed to return capital.

Gerspach said the bank was looking forward to hearing the results of the Fed's decision in March.   Continued...

The Citibank logo is pictured at its Nicaragua headquarters in Managua October 16, 2014. REUTERS/Oswaldo Rivas