Citigroup sets aside $1.9bn for Russia as US banks report mixed results

NEW YORK: Citigroup said Thursday it set aside $1.9 billion in reserves due to Russia’s invasion of Ukraine as large US banks reported mixed results amid a backdrop of geopolitical upheaval and fast-changing monetary policy.

About $1 billion in the Citi reserves are for direct exposure to Russia, while the $900 million relate to broader economic risks following the invasion, Citi Chief Financial Officer Mark Mason said on a conference call with reporters.

Since the end of 2021, Citi has reduced its overall exposure to Russia from $9.8 billion to $7.8 billion, Mason said.

Citi was one of several banks to report lower quarterly earnings compared with the year-ago period, when results were boosted by the release of reserves taken at the outset of the Covid-19 pandemic.

Both Goldman Sachs and Wells Fargo also reported lower profits. Bankers have said US consumers remain on solid footing, but have cited inflation and the Russian invasion of Ukraine as worrisome factors that will likely slow the economy and could ultimately result in a recession.

“There’s somewhat of a wait and see how some of this plays out,” Mason said of the overall environment.

“Clients are worried about inflation,” Mason said. “They’re looking at the impacts from rising rates,” he added, noting that supply chain woes exacerbated by the Russian invasion.

Citi reported a 46 percent decline in first-quarter profits to $4.3 billion, while revenues dipped two percent to $19.2 billion.

Citigroup’s earnings were also dragged lower by increased expenses, while its banking operations had a mixed performance.

Chief Executive Jane Fraser cited a difficult geopolitical and macro environment as a factor in weaker investment banking results, while pointing to trade loans and cross-border transactions as areas of strength.

Citi also scored higher net interest income, benefiting from the Federal Reserve’s shift in monetary policy.

At Goldman Sachs, profits came in $3.8 billion, down 43 percent from the year-ago period on a 27 percent drop in revenues to $12.9 billion.

Goldman sustained a big drop in revenues from asset management and equity and debt underwriting, offset by a strong activity in some trading divisions amid market volatility.

Wells Fargo, meanwhile, reported profits of $3.7 billion, down 20.8 percent from the 2021 period. Revenues fell 5.1 percent to $17.6 billion.

Wells Fargo reported broad-based loan growth, but suffered a big drop in mortgage banking income, reflecting a rising interest rate environment.

Thursday’s deluge of earnings reports comes a day after JPMorgan Chase also reported lower profits. Bankers have said the US economy remains on solid footing, while warning of increased recession risk due to the Ukraine invasion, rising inflation and uncertainty connected to the shift in Fed interest rate policy.

Wells Fargo Chief Executive Charlie Scharf echoed that tone.

“Our internal indicators continue to point towards the strength of our customers’ financial position, but the Federal Reserve has made it clear that it will take actions necessary to reduce inflation and this will certainly reduce economic growth,” Scharf said. “In addition, the war in Ukraine adds additional risk to the downside.”

Shares of Citi rose 2.2 percent to $51.23 in morning trading, while Goldman Sachs gained 0.5 percent to $323.48. Wells Fargo slumped 5.5 percent to $45.86.