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Citigroup (C) Q4 Earnings Beat Estimates, Expenses Escalate

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Citigroup (C - Free Report) has delivered an earnings surprise of 5.04% in fourth-quarter 2021. Income from continuing operations per share of $1.46 handily outpaced the Zacks Consensus Estimate of $1.39. However, the reported figure declined 24% from the prior-year quarter.

Citigroup’s investment banking revenues have jumped, driven by equity underwriting as well as growth in advisory revenues. However, fixed-income revenues were down due to decliningrates and spread products.

Net income was $3.17 billion compared with $4.31 billion recorded in the prior-year quarter.

For 2021, net income was $21.95 billion or $10.14 per share, up from the prior year’s $11.05 billion or $4.72 per share. Yearly net income per share also outpaced the Zacks Consensus Estimate of $10.07.

Revenues Rise, Expenses Flare Up

Revenues increased 1% year over year to $17.02 billion in the December-ended quarter. The top line, however, lagged the Zacks Consensus Estimate of $17.06 billion. Higher revenues from the Institutional Clients Group (ICG) segment and the corporate/other segment were offset by lower Global Consumer Banking (GCB) revenues.

For 2021, total revenues were $71.9 billion, down 4.8% year over year. Nonetheless, the top line outpaced the Zacks Consensus Estimate of $71.01 billion.

In the ICG segment, revenues were $9.87 billion in the fourth quarter, up 4% year over year. Higher total banking and securities services revenues were partly offset by lower fixed-income revenues.

GCB revenues declined 6% year over year to $6.94 billion. Lower revenues across all three regions — North America, Latin America and Asia — resulted in the decline.

Corporate/Other revenues were $208 million, improving from a loss of $80 million witnessed in the prior-year quarter.

Citigroup’s operating expenses rose 18% year over year to $13.5 billion. Continued investments in the franchise transformation, as well as higher compensation and benefits, resulted in the upsurge. These were partly negated by efficiency savings.

Balance Sheet Deteriorates

At the end of the fourth quarter, Citigroup’s end-of-period assets totaled $2.29 trillion, down 3% sequentially. Deposits were down 2.3% from the prior quarter’s numbers to $1.32 trillion. The company’s loans rose slightly to $668 billion.

Credit Quality Honed

Citigroup’s costs of credit for the December-ended quarter were a negative $0.5 billion compared with a negative $46 million recorded in the year-earlier quarter. This primarily reflected an improvement in net credit losses.

Total non-accrual assets declined 40% year over year to $3.4 billion. The company reported a fall of 30% in consumer non-accrual loans to $1.5 billion. Also, corporate non-accrual loans of $1.9 billion plunged 47%.

Citigroup’s total allowance for credit losses on loans was $16.5 billion at the end of the reported quarter or 2.49% of total loans, compared with $25 billion or 3.73%, recorded in the year-ago period.

Capital Position Decent

At the end of the fourth quarter, Citigroup’s Common Equity Tier 1 capital ratio was 12.2%, up from 11.7% in fourth-quarter 2020. As of Dec 31, 2021, book value per share was $92.21, up 7% year over year and tangible book value per share was $79.16, up 7%.

The company’s supplementary leverage ratio in the reported quarter was at 5.7%, down from 7%.

Capital Deployment

In the reported quarter, Citigroup returned $1 billion to shareholders in the form of common share dividends.

Our Viewpoint

The company delivered decent results this time around. Solid equity market revenues and the investment banking business aided the bank despite being unfavorably impacted by lower fixed income revenues. The company displays capital strength.

One can consider a strong brand like Citigroup to be a sound investment option for the long term, given its global footprint and strategic refresh efforts. Nevertheless, rising operating expenses are concerning for the company.

Citigroup Inc. Price, Consensus and EPS Surprise

 

Citigroup Inc. Price, Consensus and EPS Surprise

Citigroup Inc. price-consensus-eps-surprise-chart | Citigroup Inc. Quote

 

At present, Citigroup carries a Zacks Rank #3 (Hold). You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.

Earnings Release Date of Other Banks

We now look forward to the earnings release of U.S. Bancorp (USB - Free Report) , Citizens Financial (CFG - Free Report) and Comerica Inc. (CMA - Free Report) . USB, CFG and CMA are slated to report their quarterly results on Jan 19.