A sharp drop in bond trading revenue pushed Citigroup Inc fourth-quarter profit far below expectations, highlighting Chief Executive Vikram Pandit's challenges in fully reviving the bank. The earnings miss by Citigroup, which only survived the financial crisis thanks to a massive taxpayer bailout, stoked concern that the bank has yet to resolve the operational weaknesses that have plagued it for years.
Shares of Citigroup - which have rallied strongly over the past year as the US gradually sold off its stake in the bank - were down 4.1 percent in early trading. The bank's fixed-income revenue alone dropped 58 percent from the third quarter - compared to a 7.9 percent drop at larger rival J.P. Morgan Chase & Co, which reported its fourth-quarter earnings on Friday..
The bank's weak trading results unsettled investors, who had been reassured by the more moderate than expected drop at J.P. Morgan, ahead of other big bank earnings later this week including Goldman Sachs Group Inc on Wednesday, Morgan Stanley on Thursday and Bank of America Corp on Friday.
Bank of America shares were 1.4 percent lower and the KBW Bank index fell 1.1 percent. Citigroup, which took $45 billion in US bailout funds during the financial crisis, reported a net profit of $1.3 billion, or 4 cents per share, for the fourth quarter. The EPS was 50 percent below what analysts had expected, according to Thomson Reuters I/B/E/S.
Citigroup released about $2.3 billion in reserves for bad loans, mainly due to an improvement in the store credit cards business it has put up for sale. But a slump in Citigroup's securities and trading unit hurt revenues, which fell 6 percent on a managed basis from the third quarter to $18.4 billion. Citigroup took a $1.1 billion hit to results, before taxes, because of a credit value adjustment.