Citigroup Earnings Affected by Higher Credit and Russian Exit Costs

Citigroup (NYSE:C) first quarter earnings topped analysts’ estimates even though they saw a 46% drop in profit. C is in the process of exiting its consumer banking business in 13 markets which got complicated with the Russian invasion of the Ukraine. Reporting also this week were JPMorgan Chase (JPM) Goldman Sachs (GS), PNC Bank (PNC), Morgan Stanley MS and Wells Fargo (WFC) along with BlackRock (BLK). The earnings come after U.S. Treasuries ended Wednesday higher for the second consecutive day of solid gains in most tenors after a red hot CPI and PPI.

Citigroup

Citigroup Q1 2022 

Q1 2022 earnings before the open; conference call at 11 a.m. ET Thursday

  • Adjusted earnings of $2.02 a share on $19.2 billion of revenue, beating earnings of $1.43 a share on revenue of $18.2 billion forecast by analysts surveyed by FactSet.
  • Net income totaled $4.3 billion, down by nearly half from the year-ago quarter as the bank contended with higher credit costs and other other expenses.
  • Operating expenses increased 10% from the year-ago quarter, excluding the one-time expense of the divestiture of its Asia consumer business, as the bank spends to improve its operations.
  • Trading revenue was down slightly at the bank
  • Investment banking and corporate lending revenue saw a 32% drop.

Citigroup said it returned $4 billion to shareholders during the first quarter.

Last month Citigroup had its first investor day in five years and unveiled medium-term financial targets and spoke of efforts it is making to improve internal controls and streamline its operations.

“While the geopolitical and macro environment has become more volatile, we are executing the strategy we announced at our recent Investor Day,” Citigroup Chief Executive Jane Fraser said in prepared remarks Thursday.

Citigroup Russian Losses

However, the exits from Australia and South Korea have not been smooth and cost Citigroup nearly $1.7 billion before the Russian invasion of Ukraine. Russia is one of 13 consumer markets it was planning to exit. With Russia’s invasion of Ukraine, the bank warned last month that it could take a $4 billion hit from its exposure to the country. In Thursday’s results, that figure was lowered to a range of $2.5 billion to $3 billion, reflecting efforts the bank has taken over the last few months to minimize risks.

Another black mark was Citigroup’s Board of Directors approved incentives that could see three executives in the bank earn up to $5 million in compensation based on the transformation’s success.

“While we are making necessary investments in our infrastructure, risk and controls and our businesses, we remain committed to improving our returns over the medium term,” Fraser said.

Source: JPM, WFC, C, BLK,

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