Citigroup profit falls 11pc
Citi’s results show how investment banking units are dragging down profits for large Wall Street firms, and portend a tough fourth quarter for others such as Goldman Sachs Group Inc and Morgan Stanley, which report their results later this week.
In contrast, banks that focus more on business and consumer lending are doing better as the US economy shows some signs of recovery. Wells Fargo & Co beat analysts’ earnings estimates today, helped by improving credit quality and loan growth.
This trend was also reflected last week in the results of JPMorgan Chase & Co.
“Clearly, the macro environment has impacted the capital markets and we will continue to right-size our businesses to match the environment,” Citigroup Chief Executive Vikram Pandit said in a statement.
Citigroup stock dropped 3 per cent in premarket trading after the results.
The third-largest US bank by assets reported net income of US$1.16 billion (RM3.64 billion), or 38 cents per share, down from US$1.31 billion, or 43 cents per share, a year earlier.
Analysts, on average, expected a profit of 49 cents a share, according to surveys by Thomson Reuters I/B/E/S. Estimates were high as 76 cents a share two weeks ago.
Money manager Jeffrey Sica, president of SICA Wealth Management, an independent wealth manager based in Morristown, New Jersey, which has bet against a basket of bank stocks, said Citi’s earnings miss was “horrendous” in light of how much estimates had come down.
“It’s a very negative sign for banks in general,” said Sica.
Citi said securities and banking revenue fell 29 per cent from a year earlier, excluding the accounting impact of changes in the value of the bank’s debt.
The profit drop came despite a lower provision for bad loans: down 41 per cent to US$2.9 billion. — Reuters