Citigroup’s findings show that restructuring has its costs

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The Citi bank logo is pictured in an exhibition hall in Bangkok, Thailand on May 12, 2016. REUTERS / Athit Perawongmetha

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Jan 14 (Reuters) – Citigroup Inc (CN) showed some of the financial bruises needed for its current restructuring, posting a 26% drop in fourth-quarter profit on Friday.

The bank said results were slashed by $ 1.1 billion in after-tax expenses due to its ongoing disposals of consumer banking business outside the United States.

The lender has given up on the latest of its non-US consumer business as part of a “strategy update” initiated by CEO Jane Fraser, who took the helm in March. to know more

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Operating expenses increased 18% from the previous year with charges, but are still up 8% for its ongoing businesses.

It has also spent more in recent quarters solving problems identified by regulators in its control systems, leading to questions from investors about how much money and time remedies will take.

The bank said this week it would liquidate its massive consumer bank in Mexico and on Friday announced the sale of its retail weapons in Indonesia, Malaysia, Thailand and Vietnam to Singapore-based United Overseas Bank (UOBH.SI). to know more

Fraser said the Mexico business decision is the latest big move coming from the new strategy that will focus more closely on Citigroup’s institutional businesses.

He said the business in Mexico is “a gem”, but for someone else. L1N2TU28H

“Our vision for Citi is to be the preeminent bank for institutions with cross-border needs,” Fraser told analysts, adding that it also aims to be a “global leader in wealth, a major player in consumer payments and lending. in the internal market “.

“It’s simplified, more focused,” he said.

Citigroup’s costs also increased due to a battle for talent on Wall Street that prompted global banks to offer perks such as higher pay and bonuses.

“We’ve seen some pressure on what you have to pay to attract talent,” Chief Financial Officer Mark Mason said in a post-earnings phone call with reporters.

The higher costs pushed the bank’s profit to $ 3.2 billion, or $ 1.46 per share, in the quarter ended December 31, from $ 4.3 billion, or $ 1.92 per share, a year. first.

The decline in earnings had sent the company’s shares down by as much as 3.5% in early trading, but reduced losses after CFO Mason confirmed that the company would resume stock repurchases as expected.

The stock closed down 1.2% on Friday.

Citi had suspended buybacks in the fourth quarter to build capital ahead of the expense of closing its Korean consumer business and the impact of a new rule on derivatives risk capital.

Excluding the hit from the Asian disposals, the bank made a profit of $ 1.99 per share. Analysts on average had expected a profit of $ 1.38 per share, according to Refinitiv IBES data.

His global consumer banking revenue fell 6% as Citi-branded credit card holders in North America paid off card balances, denying him interest.

“Spending rates have gone up, which is good, but we have to see them materialize into middle income balances, which means payment rates have to normalize,” Mason said.

Revenues of Treasury and Trade Solutions, generally considered Citigroup’s strongest business, fell 1% due to low interest rates.

The bank’s overall net interest income (NII) remained stable year-over-year at $ 10.82 billion as corporate loans remained unchanged. But the bank’s NII of core lending activity outside the markets rose 0.6%.

Net interest income, which measures the difference between what Citigroup pays for money and how much it earns from loans and securities, fell to 1.98% from 2.06% a year earlier.

A positive point during the quarter was the bank’s investment banking business, which recorded a 43% increase in revenues.

Total revenue increased 1% from a year earlier to $ 17 billion.

Wall Street peers JPMorgan Chase & Co (JPM.N) and Wells Fargo & Co also reported on Friday, with their profits comfortably beating consensus estimates. to know more

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Reportage by Niket Nishant in Bengaluru and David Henry in New York Editing by Aditya Soni and Matthew Lewis

Our Standards: Thomson Reuters Trust Principles.

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