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Citigroup posted better than expected Q4 earnings and revenue Friday highlighted by its digital business. $C reported along with other money center banks JPMorgan Chase, PNC and Wells Fargo $WFC. The bank released around $1.5 billion linked to the release of previous credit loan provisions; $JPMC said it is freeing up $2.9 billion in reserves.

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Citigroup Inc NYSE: C · Reported Before Open Friday

$2.08 Beat $1.34 EPS Forecast And $16.70 Beat $16.50 billion Forecast in Revenue

Earnings

Citigroup (NYSE: C) fourth quarter earnings were better-than-expected. Earnings fell by 7 percent to $4.63 billion, or $2.08 per share, ahead of analysis predictions of $1.34 a share. Revenues were down 10 percent to $16.7 billion but just ahead of the $16.5 billion forecast before the announcement.

Citigroup said it released around $1.5 billion linked to the release of previous credit loan provisions; its year-end allowance for delinquent or unpaid loans was around $25 billion. Earlier in the day JPMC announced it is freeing up $2.9 billion in reserves.

“As a sign of the strength and durability of our diversified franchise, our revenues were flat to 2019, despite the massive economic impact of COVID-19,” outgoing CEO Mike Corbat noted in the bank’s earnings release.

Analysts focused on the bank’s cost-ratio outlook for 2021. With the recent locdkown turmoil there will be eyes on variables including geopolitics, loan growth, capital markets revenue and expense outlooks. 

The conference call management’s take on the economy, global economic growth and the health of capital markets will be scrutinized. Indications about card margins and growth in North America retail banking with updates on the firm’s national digital bank and its growth prospects in Mexico and Asia are all key data points. Market risks and the Fed's so called more flexible policy look for investment banking pipeline talk and credit quality.

Citigroup Inc NYSE: C

Market Reaction - Pre-market 66.99 −2.02 (-2.93%) Close 64.25 ▼ -4.81 (-6.96%)

Highlights

    • Card spending continued to fall. Citi-branded card revenue came in at $2.1 billion , a 13 percent year-on-year decline, reflecting lower purchase sales and higher payment rates driving lower average loans.
    • Lower spending and low interest rates, Global Consumer Banking was also down by 11 percent to $7.3 billion worldwide.
    • In North America the picture was a bit roser; revenues were down by 11 percent to $4.7 billion.
    • Mobile users of Citi banking services are up 95 percent year on year.
    • Citibank can now open accounts online in 50 countries and in the year 2020 it opened 14,000 accounts digitally, a 200 percent increase over 2019.
    • Mexico saw tremendous growth. 
    • Citi expected the pandemic would continue to accelerate digital growth in the U.S. “When we look at the States, we already have an extremely active card customer base on the digital front,” he said.

Outlook

In the conference call  CEO Corbat noted that as the pandemic wears on, Citigroup will continue to brace for uncertainty, though he repeatedly expressed enthusiasm for incoming stimulus dollars and the positive impact they will have on both the bank and its customers over the coming weeks. “What’s important to point out is the stimulus thus far has resulted in high payment rates, a consistent ability to pay on the part of the consumer. And that’s been good and showed up not only in our payment rates, but also in the lower level of delinquencies that we’ve seen and obviously the lower level of losses that we’ve seen,”

Corbat said, before noting there “certainly is a need for additional stimulus” as “if it is significant enough can ultimately drive greater consumption and support improved GDP, improved employment.”

“And so we weren’t expecting to see the same levels of pickup. I’d say the other piece is that customer acquisition across the board is lower because of COVID. And you typically do tend to see that the new customers when they come on board anyone’s platform tend to have a higher digital adoption rate. So I think we’re pretty optimistic that as we see the recovery, we’ll also see a growth in that digital adoption in the U.S. going forward.”

Corbat noted that growing digital accounts deepens client relationships and delivers more revenue. That additional entrance point with clients, he noted, gives Citigroup a lot of insight into where consumer momentum will be heading out of the crisis and where the next opportunities with new clients will be.

“I think, as we see vaccines rollout on a state by state basis, that will lead to different outcomes,” he said. “And then as we see the second round (of stimulus) in what President-elect Biden announced last night, we will have to watch what ultimately comes through and how that makes its way into the sector. So from our perspective, not just in the U.S. but around the globe, we are really taking a very granular approach on a geographic by geographic, client-by-client segment.”

Source: Citigroup

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