Citigroup’s fourth-quarter revenue falls 21% because the financial institution saves more cash for mortgage losses

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Citigroup Fourth-quarter net income fell more than 21% year over year as the bank set aside more money for potential loan losses.

Shares rose 1.7% as investors looked to some positive results in the report, including a record quarter for fixed income trading.

Here are the fourth quarter numbers compared to Wall Street’s expectations:

• Net Income: $2.5 billion versus $3.2 billion a year ago.
• Earnings: $1.10 per share, excluding certain disposals. (It wasn’t clear if this compared to the analyst estimate of $1.14 per share.)
• Revenue: $18.01 billion in revenue, above the $17.9 billion expected by analysts polled by Refinitiv.
• Net interest income: $13.27 billion, up from $12.7 billion expected by analysts, according to StreetAccount
• Trading Revenue: Fixed Income $3.16 billion, above expectations. Share trading was below expectations at $789 million.
• Provision for loan losses: $1.85 billion compared to $1.79 billion expected by analysts polled by StreetAccount.

CEO Jane Fraser’s turnaround efforts at Citigroup have hit a snag amid concerns about a global economic slowdown and as central banks around the world battle inflation. Like the rest of the industry, Citigroup is grappling with a sharp decline in investment banking earnings, partially offset by an expected increase in trading results for the quarter.

Citigroup’s net income fell 21% to $2.5 billion from $3.2 billion a year earlier, mainly due to slowing loan growth at its private bank and expectations of a weaker macro environment going forward. The weakness was partially offset by higher revenue and lower spending.

The bank said it set aside more money for loan losses going forward, increasing provisions by 35% sequentially to $1.85 billion. This build included $640 million in unfunded obligations due to credit growth at the private bank.

Revenues in the Services and Markets businesses increased 32% and 18%, respectively, due to growth in interest income and the fixed income markets. Its Fixed Income Markets division posted a 31% jump in revenue to $3.2 billion, its highest-ever fourth-quarter result, on the back of strong interest rates and currencies.

“Services delivered another great quarter with revenue up 32% and we gained significant share in both Treasury and Trade Solutions and Securities Services,” Fraser said in a release. “Markets had their best fourth quarter on record, driven by a 31% rise in fixed income, while banking and wealth management were impacted by the same market conditions they faced throughout the year.”

Banking was also strong, with private bank earnings up 5% and US private banks up 10%. However, retail banking revenues declined 3% due to lower mortgage volumes.

JPMorgan, Bank of America and Wells Fargo also reported earnings on Friday. JPMorgan beat analyst estimates for the quarter and said it now views a mild recession as its baseline scenario for 2023. Bank of America also beat Wall Street expectations as higher interest rates offset losses in investment banking.

Wells Fargo Shares rose despite the bank reporting that profits fell last quarter on a recent settlement and the bank’s increased reserves amid economic weakness.