Citigroup misses fourth-quarter revenue expectations on much weaker-than-expected bond trading

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Citigroup posted fourth-quarter revenue that missed analysts estimates by a half billion dollars as bond trading revenue declined amid a difficult December for markets.

The bank’s fixed income, currency and commodities desks produced 21 percent less revenue than a year earlier as trading conditions deteriorated after the company gave guidance in early December, according to the New York-based firm. Citigroup produced $17.1 billion in firm-wide revenue, below the $17.6 billion average estimate of analysts surveyed by Refinitiv.

But the bank made $1.61 in profit per share excluding one-time impacts of the U.S. tax overhaul, beating analysts’ expectations for $1.55 on better-than-expected cuts in expenses and loan losses.

The bank said in early December that trading revenue would likely decline from a year earlier amid choppy markets. In particular, fixed-income trading desks struggled amid gyrations in currencies and interest rates. Citigroup may also face losses of as much as $180 million on loans made to an Asian hedge fund that made soured currency bets, Bloomberg reported last month.

Another focus at Citigroup, the third-biggest U.S. lender by assets, will be on any guidance CEO Michael Corbat or CFO John Gerspach will give on performance expectations for 2019 and beyond. Thanks to the trading shortfall, Gerspach said last month at a conference that he expected to miss the firm’s goal of improving the firm’s efficiency ratio by 100 basis points.

Gerspach is retiring in March, to be replaced by Mark Mason, who is CFO of the firm’s institutional clients group. The bank shuffled other leaders across its sprawling operations last year amid the bank’s disappointing share performance. That includes the departure of global credit-card chief Judson Linville.

Shares of the New York-bank declined 30 percent last year, worse than the 20 percent decline of the KBW Bank Index, on concerns the bank’s international operations could expose it to struggling emerging markets and the U.S.-China trade war.

Here’s what Wall Street expected:

  • Earnings: $1.55 a share, a 21 percent increase from a year earlier, according to Refinitiv
  • Revenue: $17.6 billion, a 2.2 percent increase from a year earlier
  • Trading Revenue: Fixed income: $2.3 billion, Equities: $664.5 million, according to FactSet
  • Efficiency ratio: 57.6

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