Citigroup says fourth-quarter trading profits continued into 2017
Citigroup Inc said vibrant markets after Donald Trump's surprise election victory in November drove up its fourth quarter profits, a trend that has carried into the new year.
"We closed the year with good momentum across many of our businesses," Chief Financial Officer John Gerspach told reporters after reporting results.
In the wake of Trump's presidential victory, Wall Street trading desks benefited from higher volume and volatility in bonds, currencies and stocks. Gerspach said client demand for trading has continued to be good into the new year.
Citi's fourth-quarter profits rose around 7 percent, mirroring strong results form most other U.S. banks.
Net income rose to $3.57 billion, or $1.14 per share, in the quarter ended Dec. 31, from $3.34 billion, or $1.02 per share, a year earlier, topping the average analyst estimate of $1.12 per share, according to Thomson Reuters I/B/E/S.
Citigroup's revenue from fixed-income trading rose about 36 percent, while equity trading revenue rose about 15 percent, pushing up total markets and securities services revenue by about 24 percent compared with the same quarter last year.
Goldman Sachs Group Inc , which also posted earnings on Wednesday, posted a jump of about 78 percent in revenue from trading fixed-income securities, currencies and commodities in the quarter. JPMorgan Chase & Co and Morgan Stanley also reported sharp increases in fixed-income trading revenue.
Shares of U.S. banks staged a dramatic rally in the first month following Trump's victory as investors expect banks to reap huge benefits from lighter regulation under his presidency. Still, bank shares fell on Tuesday as concerns about protectionist trade policies planned by U.S. President-elect Trump weighed on the wider market.
Citigroup's shares, which had risen about 17 percent since the election, fell 1.3 percent to $57.61 in morning trading on the New York Stock Exchange.
Adjusted revenue from Citicorp, Citigroup's ongoing businesses, rose 6 percent to $16.36 billion. Citicorp's expenses fell 2 percent to $9.46 billion.
Operating expenses at the ongoing businesses fell 2 percent to $9.46 billion.
INTERNATIONAL CULL OVER?
Citigroup has about half of its business outside of the United States, which is a bigger international presence than the other big American banks. Since the financial crisis, it has been exiting less-profitable operations in markets around the world, but the bank's executives expressed confidence in their remaining operations.
Gerspach said the bank was comfortable with is current footprint in Asia and Latin America. That includes its Citibanamex business in Mexico, which Citigroup has faced some investor pressure to sell due to the risk that Trump will hurt the economy there and its currency. The peso has lost 15 percent of its value against the U.S. dollar since the election.
Gerspach also said that the bank's longstanding network for international transactions could create a competitive advantage for the bank if there are more restrictions on trade put in place. The network has been the envy of other big U.S. banks.
While Citigroup has been shrinking, it has worked to return capital to investors. The bank said it returned nearly $11 billion in capital to shareholders last year.
The bank did encounter some obstacles in the quarter. It saw a decline in the value of some fixed-income assets because of the rise in interest rates, which in turn constrained its ability to use deferred tax assets that are part of its appeal to some investors.
Also, Citigroup's net interest margin - the profit margin between the bank's cost of money and the interest it gets on lending out and buying securities - fell to 2.79 percent from 2.92 percent last year. Gerspach said the decline was more than expected, partly because it was carrying higher-than-anticipated credit card balances for customers who pay their bills immediately to avoid interest charges.
(Reporting by Sweta Singh in Bengaluru and David Henry in New York; Editing by Michael Erman and Nick Zieminski)