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Citigroup reported better than expected Q1 earnings Thursday before the market including a $3.4 bln credit reserve release. $C reported after JPMorgan Chase, Goldman Sachs and Wells Fargo. Citi will operate consumer banking solely from 4 wealth centers: Singapore, Hong Kong, UAE, and London.

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Citigroup Inc NYSE: C · Reported Before Open Thursday

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

Earnings

Citigroup (C) reported a Q1 EPS beat in the first earnings release for new CEO Jane Fraser, who took over in February from the retiring Michael Corbat. She was promoted after serving as CEO of Citi's Global Consumer Banking (GCB) division.

EPS more than triple yr/yr to $3.62, well ahead of the $2.18 consensus. Revenue fell 6.9% yr/yr to $19.33 bln, but the fall was actually much narrower than had been expected $18.8 billion estimate..

Allowance For Credit Losses

The allowance for credit losses (ACL) on loans has been the feature of this quarter banks reports. The ACL refers to the monies set aside when the pandemic started ahead of what it feared would be a cascade of loan defaults by consumers and small businesses. However the banks overestimated the level of defaults and are now unwinding those credit reserves, which is giving a boost to banks' earnings.

Citigroup's ACL was reduced to $21.6 bln at the end of Q1, a pretty significant $3.4 bln credit reserve release relative to the $25.0 bln at the end of Q4. Last quarter, Citi disappointed investors with a release of just $1.4 bln, JPM included $5.2 bln in yesterday's earnings report.

Citigroup Focusing on Wealth Management

Citi said that it will close most of its consumer banking operations in Asia, Europe, and the Middle East in order to focus on wealth management. Citi will operate consumer banking solely from four wealth centers: Singapore, Hong Kong, UAE, and London.

Citi will exit 13 markets where it does not have the scale to compete. Ms. Fraser as a former CEO of GCB knows the segment well. The bank is exiting consumer operations in Australia, Bahrain, China, India, Indonesia, Korea, Malaysia, the Philippines, Poland, Russia, Taiwan, Thailand and Vietnam. T

"As a result of the ongoing refresh of our strategy, we have decided that we are going to double down on wealth," Fraser said in the release. The move to focus on the remaining markets "positions us to capture the strong growth and attractive returns the wealth management business offers through these important hubs."

Expectations were for EPS of $2.57, on revenue of $18.80 billion.

Citigroup Inc. (C)  is expected to report adjusted net income of $5.4 billion, or $2.57 a share, on sales of $18.8 billion before the market opens on Thursday, based on a FactSet survey of 20 analysts. In the same period a year ago the company posted earnings of $1.05 a share on sales of $20.7 billion. It reported a net income of $5 billion.

The stock has risen 12.6% since the company last reported earnings on Jan. 15.

 Big Banks Kick Off First Quarter 2021 Earnings Season

The bank rally has been fueled by expectations for the economy reopening and infrastructure spending.  The new surge in home prices has also buoyed optimism for the mortgage business and banks profits thereto.

Citigroup Inc NYSE: C

Market Reaction - Lunch time 72.33 ▼ 0.58 (0.80%)

Highlights

  • Citi's GCB segment was the main culprit for the revenue decline. Segment sales fell 14% yr/yr to $7.04 bln. Despite the decline, Citi says this is the healthiest it has seen the consumer emerge from a crisis in recent history.
  • Citi's Institutional Clients Group (ICG) segment revenue fell 2% yr/yr to $12.22 bln as growth in Banking and MSS was more than offset by the absence of mark-to-market gains on loan hedges vs last year.
  • Citigroup said it had released $3.9 billion in loan-loss reserves in the quarter, which resulted in a $2.06 billion gain after $1.75 billion in credit losses in the period. Analysts had expected a $393.4 million provision in the quarter.
  • The bank posted record revenue from investment banking and equities trading,.
  • Citigroup equities trading revenue of $1.48 billion exceeded analysts' estimate by more than $300 million, and fixed income trading revenue of $4.55 billion topped the estimate by roughly $100 million.
  • Investment banking revenue surged 46% to $1.97 billion, about $300 million more than the estimate, on high activity in equity underwriting because of the boom in SPAC issuance, the firm said.

C Earnings Q1 21

 

Source: Citigroup, AlphaStreet

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