Citigroup Personal Banking Revenue and Indian Exit Boost Earnings

Citigroup reported better than expected first quarter earnings Friday before the market open along with three of the largest U.S. lenders, JPMorgan Chase (JPM), Wells Fargo (WFC) and PNC (PNC). Citigroup reported earnings of $2.19 per share for the quarter beating estimates of $1.70 a share. Citi divested its consumer business in India and generated a gain on the sale. Like JPMorgan set aside more money for credit losses preparing for a weaker economic backdrop.

On the positive side $C again saw strong gains from US personal banking with revenue up 18% year over year, reflecting higher interest rates and gains in the cards businesses. Citigroup is still working through its strategic transformation under Jane Fraser and the market will be looking for progress reports.


Citigroup Q1 2023 Earnings

Q1 2023 earnings released at 8:00 a.m. ET; conference call at 11:00 a.m. ET via live webcast and teleconference.


  • Net income: $4.6 billion vs. $4.3 billion in the same period last year
  • $2.19 per share. Projected EPS: $1.70 cents
  • $21.45 billion in revenue vs. $19.99 billion expected, according to Refinitiv.
  • Net Interest Income: $13.27 billion, above 12.7 billion expected
  • Deposits at the end of March were down 3% quarter over quarter.
  • U.S. personal bank revenues up 18% year over year, reflecting higher interest rates.
  • Citigroup’s Treasury and Trade Solutions (TTS) group, which provides working capital and payments services for multinational corporations, continued to be a bright spot for the bank, posting a 31% year-over-year jump in revenue.
  • Legacy Franchises’ revenues of $2.85 billion were up 48% year over year.
  • Revenue for fixed income and equity trading was down 4% from the prior year. Fixed income markets revenue rose 4% year over year, 
  • Citigroup’s operating expenses increased 1% year over year to $13.28 billion.
  • Provision for credit losses $1.98 billion, slightly above the $1.89 billion provision for credit losses expected by analysts, according to StreetAccount, and up 7% from the prior quarter.

“Our robust and well-managed balance sheet was a source of strength for our clients and we continue making progress in executing our strategy focused on our five core interconnected businesses while simplifying and transforming the firm,” CEO Jane Fraser said in a statement.

C: Stock Market Reaction

  • 49.40 ▲ +2.10 (+4.43%) Morning
  • 49.40 ▼ -1.54 (-3.02%) past year
  • 49.40 ▼ -20.63 (-29.47%) past 5 years
  • 52wk High $54.56
  • 52wk Low $40.01

Higher Interest Rates Increase Revenue …. But at a Cost

The Federal Reserve’s rate-boosting campaign, producing more revenue as rates rise, allowing banks to generate more profit from their core activities of taking in deposits and making loans. With higher interest rates from the Federal Reserve’s aggressive rate hiking revenues are expected to rise from a year earlier. Net interest income (NII) widened as the net interest margin widened, simply the gap has widened the gap between what the big commercial banks pay depositors and what they earn lending money out.

However, there is a price for this, the clearest is the housing market which with the collapse in affordability through higher rates and inflation has dropped off dramatically ion activity. For banks this means the fee income from home lending has fallen right off.

Rising rates have also had another big impact for Banks, and Central banks alike, the higher rates have seen huge losses on the bond paper they hold. When interest rates go up, bond prices go down, meaning there are significant unrealized losses at current prices.

Investment Banking Fees Slide Continues

Credit Losses

The bank said it set aside more money for credit losses going forward of $1.98 billion, slightly above the $1.89 billion provision for credit losses expected by analysts, according to StreetAccount, and up 7% from the prior quarter. Citigroup’s total allowance for credit losses on loans was $17.2 billion at the end of the reported quarter compared with $15.4 billion in the year-ago period.

Total non-accrual loans declined 23% year over year to $2.6 billion.

Citigroup’s costs of credit for the first quarter were $1.97 billion compared with the $755 million recorded in the year-earlier quarter.

Capital Position

  • At the end of the first quarter, Citigroup’s Common Equity Tier 1 capital ratio was 13.4%, up from 11.4% in first-quarter 2022.
  • The company’s supplementary leverage ratio in the reported quarter was at 5.9%, rising year over year from 5.6%.

Oversea Market Exits

Over the last year, the bank announced plans to exit 14 international markets and has made progress on either closing sales or winding down 10 of those businesses.

Citigroup closed two more divestitures during the first quarter, including its consumer business in India to Axis Bank Limited that generated a gain on the sale. The deal was announced in March 2022. The sale includes retail banking, credit cards, wealth management and consumer loans, as well as the transfer of around 3,200 Citi employees. The transaction is anticipated to result in a regulatory capital release of $1.4 billion.

Net income was down 19% year over year when excluding the impact of the sales.

Accumulated Other Comprehensive Income or AOCI

With higher rates banks having parked park excess funds in government bonds and mortgage-backed securities the losses are pronounced. Both investments have fallen in value sharply this year, which means banks will have to mark down their portfolios accordingly. These losses are reported as changes to “accumulated other comprehensive income,” or AOCI, but the important thing is they draw down capital.

Citigroup Last Quarter Earnings

Analysts Outlook

MorningstarNote by – Eric Compton, CFA Apr 5, 2023

Citi’s Cheap but Will Require Patience

Citigroup was our top pick in 2022, and it has held up better over the past year than any bank we cover except for JPMorgan JPM. Even so, it is still trading at one of the largest discounts to fair value in our coverage. We see the risk of deposit outflows as minimal, given that Citi is a global systemically important bank. Citigroup has some of the lowest unrealized losses on securities relative to overall capital in our coverage, and it has some idiosyncratic catalysts—finishing the Mexico sale, selling off the rest of its noncore business units, providing expense guidance for 2024, and moving beyond regulatory hurdles—that we think can help it break the overall correlation with the banking sector over time. We also wonder if the recent turmoil in the European banking sector could open up additional opportunities for growth for Citigroup in the near to medium term.

While we like Citigroup’s valuation, investors should understand what they are getting into with the bank, which we view as a deep-value turnaround play with a multiyear time horizon. Also, a recession might uniquely pressure Citigroup, which has larger proportional credit card exposure relative to its peers. Still, we think long-term investors are being more than adequately compensated to bear these risks, and we see material upside to the current stock price.

Source: C, TC, WSJ

From The TradersCommunity Research Desk