CM – Citigroup profit triples when the reserve is released

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Citigroup Inc beat market estimates for first quarter earnings on Thursday as the third largest US lender released reserves for pandemic loan losses and announced plans to exit some overseas consumer units. The sale comes as Jane Fraser, who took over as Chief Executive Officer on March 1, attempts to transform Citigroup from a lagging banking industry of poor risk and control systems into a competitively profitable organization. By shifting markets to Asia and EMEA, the bank will move out of the consumer business to countries like Australia, China and India. « While the … 13 markets do excellent business, we don’t have the scale we need to be competitive, » Fraser said in a statement.

« We believe that our capital, our investment funds, and others Resources can be better used against higher return opportunities in asset management and in our institutional businesses in Asia.  » Institutional Clients Group will continue to provide services to clients and will continue to operate « asset centers » in Singapore and Hong Kong, as well as London and the United Arab Emirates. The bank did not give a timeframe for the exits.

Like other major Wall Street banks, Citi benefited from a boom in capital markets activity in the quarter, but felt the impact of cash-flush consumers repaying loans and using debit cards more often for purchases use. « As everywhere, retail and banking were a little stronger than expected and net interest income a little weaker, but basically everything was pretty much in line with expectations, » said Oppenheimer analyst Chris Kotowski in a message to customers.

The net interest income, the difference between interest earned by the bank and payments on deposits and loans were $ 10.17 billion, a decrease of 12 percent from a year earlier. Total revenue declined 7 percent to $ 19.3 billion due to low interest rates and a 10 percent decline in credit, mainly due to lower consumer credit card credit balances. Total card sales increased one percent, although total card sales decreased 18 percent. JPMorgan Chase & Co said Wednesday that consumer debit and credit card spending was up nine percent year over year. Citigroup’s investment banking revenues partially offset the burden of interest income and increased 46% due to higher stock subscription fees. The bank was a leader on Wall Street in raising money for so-called blank check firms or special purpose vehicles. Citi shares rose nearly three percent before the bell.

Net income tripled from $ 2.54 billion or $ 1.06 per share last year to $ 7.94 billion or $ 3.62 per share. Refinitiv IBES analysts had expected an average profit of $ 2.60 per share.

Citigroup’s bottom line was supported by the decision to reduce reserves of $ 3.85 billion due to anticipated credit losses the pandemic had built up. A year earlier, the company had increased its loss reserves by $ 4.88 billion. Like other major lenders, the bank expects an economic recovery, fueled in part by the rollout of vaccines across the country and a $ 1.9 trillion stimulus package pushed through by the Biden administration last month. A US boom could rebound credit income for big banks, prompting them to reverse more than the over $ 65 billion loss reserves added last year when the outlook for the pandemic economy was most bleak .

Citigroup’s markets and securities turnover rose two percent compared to an exceptionally strong quarter last year. Spending on higher spending to establish risk controls and improve business operations increased four percent, in line with the company’s projections.

Data in Citigroup’s report showed that pre-provision profit, a measure of bank performance, which was not influenced by changes in the estimates and economic assumptions for the loss reserves, fell by 18 percent compared to the previous year. The previous Thursday, the Bank of America Corp. more than doubled after releasing reserves that it had set aside to cover loans that could go bankrupt.

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