CITIGROUP YESTERDAY highlighted the challenges it faces in regaining the ground lost during the financial crisis, unveiling fourth-quarter results that disappointed investors and sent its shares sharply lower.
Citi’s poor performance overshadowed its first yearly profit since 2007 and weakened its assertions that the US financial giant had overcome its troubles and was ready to compete head-on with Wall Street rivals.
Shares in the group were down by more than 6 per cent to $4.78 in early afternoon trading in New York after the bank reported earnings per share of $0.04, well below analysts’ expectations of $0.08, in spite of a favourable tax rate.
Executives blamed the lacklustre performance on a $1.1 billion loss caused by a rise in the price of Citi’s own debt as the US Treasury sold off the stake it had received in return for a $45 billion bailout during the crisis.
Citicorp, the bank’s consumer and corporate banking division, recorded net income of $2.4 billion, while Citi Holdings, which includes assets the bank is trying to shed, recorded a net loss of $1 billion in the fourth quarter.
“Our core businesses in Citicorp, with its deep roots in both the developed and emerging markets, performed well throughout the year,” Vikram Pandit, Citigroup’s chief executive, said in a statement.
However, investors pointed to higher-than-expected expenses and lower trading revenues in fixed income and equities as evidence of Citi’s problems.
“The miss was mostly due to weak trading and stubborn expenses,” Glenn Schorr, an analyst at Nomura, wrote in a note.
John Gerspach, Citi’s finance chief, told investors Citi’s management would keep a tight lid on expenses.
The fixed income division suffered a higher-than-expected 32 per cent drop in revenues from the previous quarter, while the equities trading division was hit by a sluggish performance by the “proprietary” desk that bets with the bank’s own money.
For 2010, Citi recorded $10.6 billion in net income, compared with a $1.6 billion loss in 2009.
Citi employs 2,000 people at offices in Dublin’s financial services centre. – (Copyright The Financial Times Limited 2011)
