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Citigroup Q4 net plunges 86% on legal charges, slim trading revenue

Last updated: 08:44 15 Jan 2015 EST, First published: 09:44 15 Jan 2015 EST

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Citigroup (NYSE:C), the third-largest U.S. bank, reported an 86 percent drop in fourth-quarter profit as it took charges of $3.5 billion to settle legal claims, and trading revenue also disappointed. Shares fell.

Net income fell to $350 million, or $0.06 per share, in the October-to-December quarter, from $2.46 billion, or $0.77 per share, a year earlier, the New York-based company said in a statement today.

Adjusted net income fell to $346 million, or $0.06 per share, from $2.60 billion, or $0.82 per share, a year earlier.

That’s less than the $0.11 average estimate of 12 analysts surveyed by Capital IQ.

Total revenue excluding accounting adjustments fell 0.8 percent over the prior year to $17.8 billion, missing the $18.6 billion estimate of 18 analysts surveyed by Capital IQ. Adjusted revenue fell largely due to the strong U.S. dollar and weaker results from fixed-income trading.

Shares declined 2.2 percent to $47.97 at 9:34 a.m. in New York, extending losses since the beginning of the year to 11 percent.

Declining fixed-income business cut markets revenue 14 percent, worse than the 5 percent drop Chief Executive Officer Michael Corbat predicted a month ago.

JPMorgan Chase & Co. yesterday reported a 14 percent drop in that business, excluding the sale of a commodities unit, to the lowest level since the financial crisis. Bank of America also reported today trading results that were worse than expected, with sales and trading revenue plunging 20 percent from a year earlier to $2.37 billion after a tough December.

Trading in equities at Citigroup generated $471 million in revenue, a 2.7 percent decline from a year earlier. That compares with JPMorgan’s 25 percent jump to $1.1 billion.

Legal and so-called repositioning expenses—or those tied to Citigroup’s cost-cutting efforts—as previously disclosed were about $3.5 billion, up from $363 million a year earlier.

The bank's most recent legal woes stem from government probes into alleged manipulation of currency markets and Libor interest rates as well as lax compliance with money laundering rules. The company still faces other possible actions by the U.S. Department of Justice and Federal Reserve.

Citigroup boosted the quarter’s results by taking $441 million out of reserves for loan losses. The bank now has $16 billion in reserve, or 2.5 percent of total loans outstanding.

Consumer banking revenue rose 3 percent on a constant-dollar basis, reflecting strength in Citi's North American business as well as one-time gains from the sale mortgage loans.

Citi is the most international of the big U.S. banks, with about half of its business coming from abroad.

"While the overall results for 2014 fell short of our expectations, we did make significant progress on our top priorities ...," Corbat said in the statement. "Although we made some difficult decisions ... I believe they allowed us to put our franchise in a position to have a successful 2015."

 

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