Citi profits drop as slowdown and lay-offs bite
Citigroup’s profits fell more than a third last quarter, hit by slower corporate spending, a dearth of deals and a costly round of lay-offs.
The New York-based bank reported $2.9bn in net income, down from $4.5bn in the same period last year. Revenues dipped 1 per cent to $19.4bn in a quarter marked by mounting fears of a US recession.
Revenue in Citi’s large cash management and payment processing unit, which caters for corporations, was up just 15 per cent, less than half the 32 per cent growth in the same period last year.
Like its rivals, Citi was not able to escape the sharp slowdown in dealmaking. Revenue from corporate and investment banking tumbled 44 per cent in the quarter while fees from its markets business — trading stocks and bonds on behalf of clients — fell 13 per cent.
The weakness across several of its businesses led the bank to announce plans last month to cut as many as 5,000 staff. During the quarter, Citi’s expenses rose by more than $1bn, mostly tied to the lay-offs.
“Amid a challenging macroeconomic backdrop, we continued to see the benefits of our diversified business model and strong balance sheet,” Citi chief executive Jane Fraser said on Friday. “In banking, the long-awaited rebound in investment banking has yet to materialise, making for a disappointing quarter.”
A still resilient US consumer, however, proved a bright spot for Citi. Revenue from Citi’s retail credit card business rose 27 per cent in the period, helping the bank’s overall profits beat Wall Street’s expectations.
As the Federal Reserve signals its determination to keep raising interest rates to bring down inflation, Citi is expecting that more of its loans will sour. Its provision for loan losses in the quarter rose nearly 40 per cent to $1.8bn. Its overall lending in the quarter was little changed from a year ago.
Deposits came in nearly unchanged from the prior quarter. Analysts had warned that banks, even the big ones, could see deposit outflows this quarter as consumers chase higher-yielding investments.
Citi is still battling to regain its footing a decade and a half after the financial crisis. Fraser, who took over in 2021, has led the bank through a restructuring, pulling Citi out of underperforming businesses and closing retail branch networks around the globe in an effort to reduce costs.
Source: Financial Times
