Citi Q4 Earnings Beat On Low Expenses, Revenues Disappoint

Citigroup (C - Free Report) kick-started the earnings season and delivered a positive earnings surprise of 3.9% in fourth-quarter 2018, backed by expense control and lower cost of credit. Adjusted net income per share of $1.61 for the quarter handily outpaced the Zacks Consensus Estimate of $1.55. Also, adjusted earnings climbed 26% year over year.

Adjusted net income was $4.2 billion, up 14% year over year. Including the impact of tax reform, net income came in at $4.3 billion or $1.64 per share.

Citigroup displayed prudent expense management during the quarter. Moreover, higher equity market revenues, along with loan growth, were positives. However, investment banking revenues disappointed as a strong advisory business were more than offset by lower underwriting fees on lower market activity.

Additionally, as expected, lower fixed income market revenues amid challenging trading environment and expanding credit spreads, mainly in December, was on the downside.

Citigroup’s costs of credit for the Dec-end quarter were down 7% year over year to $1.93 billion. This fall largely underlines reduced net credit losses of $1.8 billion and a credit reserve build of $111 million.

For full-year 2018, adjusted net income came in at $18 billion compared with $15.8 billion recorded in 2017.

Expenses Drop, Revenues Disappoint

For full-year 2018, the company reported revenues of $72.9 billion, up 1% year over year. Yet it lagged the Zacks Consensus Estimate of $73.3 billion.

Revenues were down 2% year over year to $17.1 billion in the reported quarter. The reported figure also missed the Zacks Consensus Estimate of $17.5 billion. Reduced revenues from Institutional Clients Group (ICG) and the wind-down of legacy assets in Corporate/Other segment were responsible for the downside.

In ICG, revenues came in at $8.2 billion in the quarter, down 1% year over year. Fixed income market revenues decreased 21% year over year, leading lower total markets and securities services revenues by 11%.  However, equity markets were up 18% and total banking revenues rose 5%, partly offset by lower investment banking revenues.

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