Lower legal bill boosts Citi profit but core revenue weak
By Sweta Singh and David Henry
(Reuters) - Citigroup Inc (C.N: Quote) reported a massive jump in quarterly profit as a sharp drop in legal costs and gains from the disposal of unwanted assets masked weak revenue from its core business.
Shares of Citi, which was displaced by Wells Fargo & Co (WFC.N: Quote) as the No.3 U.S. bank by assets, fell as much as 7.2 percent to a near three-year low of $42.11 on Friday.
U.S. banks struggled to grow their revenue last year, hurt by near-zero interest rates, a slump in oil prices and investor cautiousness due to worries about slowing growth in China.
Most banks have resorted to aggressive cost controls to boost profits and Citi was no different. The bank has also been exiting less profitable markets and businesses.
Adjusted revenue from its main Citicorp business declined 2 percent in the fourth quarter, but lower costs helped the unit increase profit.
"It is almost impossible to specify what the 'true' operating results were," Oppenheimer analyst Chris Kotowski wrote in a note.
The bank's legal and repositioning costs plunged to $724 million from $3.55 billion, a year earlier. Total expenses fell 22.8 percent to $11.13 billion.
Costs cuts and a smaller legal bill also helped JPMorgan Chase & Co (JPM.N: Quote) report a 10 percent rise in quarterly profit on Thursday, and the largest U.S. bank by assets forecast incremental increases in the amount set aside for losses on loans to the energy sector this year. Continued...