Citigroup Slides on Cost Worries, Despite Q4 Beat

One of the top S&P 500 companies, Citigroup (NYSE: C), reported upbeat results in the fourth quarter of 2021. Despite the beat, shares of the global investment bank fell 1.25% to close at $66.93 on Friday on the back of escalating expenses. 

Results in Detail 

Citigroup reported earnings of $1.46 per share in the quarter, easily beating the Street estimates of $1.37 per share, but decreasing 24% year-over-year. Excluding the pre-tax impact of about $1.2 billion ($1.1 billion after taxes) associated with the divestitures of Citigroup’s consumer banking businesses in Asia, earnings stood at $1.99 per share, up 4%. 

Additionally, revenues increased 1% year-over-year to $17 billion and surpassed analysts’ expectations of $16.77 billion. Net interest margin came in at 1.98%, down 8 basis points. 

Segment-wise, the company’s Global Consumer Banking segment recorded revenues of $6.9 billion, down 6% year-over-year, impacted by a reduction in revenues across regions. 

Meanwhile, driven by strong revenues at investment banking and the Private Bank and Securities Services, the Institutional Clients Group segment’s revenues jumped 4% to $9.9 billion. However, lower revenues at Fixed Income Markets acted as a headwind. 

Furthermore, net credit losses plunged 41% year-over-year to $866 million in the quarter. 

On the negative side, Citigroup’s expenses surged 18% year-over-year to $13.5 billion. Excluding the impact of Asia divestitures, costs escalated 8%. Continued investments in the bank’s transformation, business-led investments, and revenue-related expenses led to this surge. Yet, efficiency savings mitigated the rise partially. 

Loan & Deposit Portfolio 

The company reported total loans of $668 billion, down 1% from the prior-year quarter. Meanwhile, total deposits grew 3% to $1.32 trillion. 

Full-Year 2021 Results 

For 2021, Citigroup reported an almost double net income of $22 billion, compared to $11.05 billion in the prior year. Meanwhile, revenues of $71.9 billion were down 5% from $75.5 billion reported in 2020. 

Official Comments 

In response to the reported results, Citigroup CEO Jane Fraser commented, “We had a decent end to 2021 driving net income for the year up to $22 billion in what was a far better credit environment than the previous year. Citi returned nearly $12 billion of capital to shareholders and Tangible Book Value increased 7% during the year. We continue to Transform our bank with a focus on simplification and building a culture of excellence.” 

Wall Street’s Take 

On January 14, CFRA upgraded Citigroup to a Buy from a Hold, but maintained the price target of $76 (13.55% upside potential). 

CFRA’s positive stance is based on the bank’s restructuring moves in 2022 under the new CEO’s regime. 

The rest of the Street is cautiously optimistic about the stock, with a Moderate Buy consensus rating based on 8 Buys and 7 Holds. The average Citigroup stock price prediction of $77.79 implies 16.23% upside potential to current levels. Shares have jumped 7.4% over the past year. 

Bloggers Weigh In 

TipRanks data shows that financial blogger opinions are 88% Bullish on Citigroup, compared to a sector average of 71%.

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