New York Citigroup Inc. today reported net income for the fourth quarter 2019 of $5.0 billion, or $2.15 per diluted share, on revenues of $18.4 billion. This compared to net income of $4.3 billion, or $1.64 per diluted share, on revenues of $17.1 billion for the fourth quarter 2018.
Revenues increased 7% from the prior-year period, with strong results across both the Institutional Clients Group (ICG) and Global Consumer Banking (GCB). Net income increased 15% from the prior-year period, driven by the higher revenues and a lower effective tax rate, partially offset by higher expenses and cost of credit. Earnings per share of $2.15 increased 31% from the prior-year period, primarily driven by a 10% reduction in average diluted shares outstanding and the growth in net income. These results include a net benefit of approximately $0.25 per share in the current quarter related to discrete tax items, recorded in Corporate / Other6.
Citi CEO Michael Corbat said, “Our earnings of $5 billion for the fourth quarter marked a strong finish to 2019. Our full year Return on Tangible Common Equity of over 12% exceeded our target. Due to good client engagement, we drove balanced growth across our products and geographies, closing the year with 16 consecutive quarters of loan and deposit growth. The U.S. consumer franchise saw continued strong growth in Branded Cards and sustained its momentum in attracting digital deposits. Investment Banking continued to gain share and, despite a lower rate environment, Treasury and Trade Solutions grew revenue as we work to ensure our global network remains indispensable to our clients. With increased revenues and disciplined expense management, we had positive operating leverage, even as we continued to make significant investments in the franchise.
“We ended 2019 with a Common Equity Tier One ratio of 11.7% and we are on track to deliver our commitment of returning over $60 billion of capital to our shareholders over a three-year period. We enter 2020 in a strong competitive position, from capital and liquidity to talent and technology. We continue to invest in areas where we see opportunities for client-led growth and in our infrastructure, in light of the enduring need to be an indisputably strong and stable institution,” Mr. Corbat concluded.
For the full year 2019, Citigroup reported net income of $19.4 billion on revenues of $74.3 billion, compared to net income of $18.0 billion on revenues of $72.9 billion for the full year 2018.
Percentage comparisons throughout this press release are calculated for the fourth quarter 2019 versus the fourth quarter 2018, unless otherwise specified.
Citigroup operating expenses of $10.5 billion in the fourth quarter 2019 increased 6%, reflecting higher compensation and volume-related expenses, along with continued investments in the franchise, partially offset by efficiency savings and the wind-down of legacy assets.
Citigroup cost of credit of $2.2 billion in the fourth quarter 2019 increased 15%, primarily driven by volume growth and seasoning in North America GCB, along with volume growth and several episodic downgrades in ICG, while overall credit quality remained stable.
Citigroup net income of $5.0 billion in the fourth quarter 2019 increased 15%, driven by the higher revenues and the lower effective tax rate, partially offset by the growth in expenses and cost of credit. Citigroup’s effective tax rate was 12% in the current quarter compared to 19% in the fourth quarter 2018. Excluding the previously mentioned discrete tax items in the quarter, the tax rate would have been approximately 22%.
Citigroup's allowance for loan losses was $12.8 billion at quarter end, or 1.84% of total loans, compared to $12.3 billion, or 1.81% of total loans, at the end of the prior-year period. Total non-accrual assets grew 12% from the prior-year period to $4.1 billion. Consumer non-accrual loans declined 10% to $1.8 billion and corporate non-accrual loans grew 45% to $2.2 billion.
Citigroup's end-of-period loans were $699 billion as of quarter end, up 2% from the prior-year period. Excluding the impact of foreign exchange translation7, end-of-period loans also grew 2%, driven by 3% aggregate growth in ICG and GCB, partially offset by the continued wind-down of legacy assets in Corporate / Other.
Citigroup's end-of-period deposits were $1.1 trillion as of quarter end, an increase of 6% from the prior-year period. In constant dollars, Citigroup’s end-of-period deposits also increased 6%, driven by 7% growth in GCB and 6% growth in ICG.
Citigroup's book value per share of $82.90 and tangible book value per share of $70.39 each increased 10% versus the prior-year period, driven by net income and a reduced share count. At quarter end, Citigroup’s CET1 Capital ratio was 11.7%, up from the prior quarter, driven by a reduction in risk-weighted assets. Citigroup’s SLR for the fourth quarter 2019 was 6.2%, a decrease from the prior quarter. During the quarter, Citigroup repurchased 69 million common shares and returned a total of $6.2 billion to common shareholders in the form of common share repurchases and dividends.
North America GCB revenues of $5.3 billion increased 4%. Citi-Branded Cards revenues of $2.4 billion increased 10%, reflecting volume growth and spread expansion. Retail Banking revenues of $1.1 billion decreased 4%, as deposit growth in both traditional and digital channels was more than offset by lower deposit spreads. Citi Retail Services revenues of $1.7 billion increased 1%, reflecting continued growth in loans and purchase sales across the majority of the portfolio.
Latin America GCB revenues of $1.4 billion increased 10% on a reported basis and 6% in constant dollars including several small, episodic gains, as well as higher deposit spreads and growth in cards revenues.
Asia GCB revenues of $1.8 billion increased 4% on both a reported basis and in constant dollars, driven by higher investment revenues.
GCB operating expenses of $4.4 billion were largely unchanged versus the prior year. In constant dollars, expenses decreased 1%, as efficiency savings more than offset continued investments in the franchise and volume-driven growth.
GCB cost of credit of $2.0 billion increased 8% on a reported basis and 7% in constant dollars. The increase was largely driven by higher net credit losses, primarily reflecting volume growth and seasoning in Citi-Branded Cards and Citi Retail Services in North America GCB.
GCB net income of $1.6 billion increased 12% on a reported basis and 11% in constant dollars, driven by the higher revenues and the lower expenses, partially offset by the higher cost of credit.
Banking revenues of $5.4 billion were largely unchanged versus the prior year (including gain / (loss) on loan hedges)8. Treasury and Trade Solutions revenues of $2.6 billion increased 2% on a reported basis and 3% in constant dollars, reflecting strong client engagement and solid growth in deposits and transaction volumes, partially offset by the impact of lower interest rates. Investment Banking revenues of $1.4 billion increased 6%, primarily reflecting strong performance in equity and debt underwriting, particularly investment grade underwriting. Advisory revenues declined 19% to $373 million, equity underwriting revenues increased 33% to $240 million and debt underwriting revenues increased 16% to $738 million. Private Bank revenues of $847 million increased 6%, driven by higher lending and investment activity, with both new and existing clients, partially offset by spread compression. Corporate Lending revenues of $732 million were largely unchanged (excluding gain / (loss) on loan hedges), as growth in the commercial portfolio was offset by lower volumes in the rest of the portfolio.
Markets and Securities Services revenues of $3.9 billion increased 28%. Fixed Income Markets revenues of $2.9 billion increased 49%, largely reflecting a recovery from the prior-year period in addition to strong performance, particularly in rates and spread products. Equity Markets revenues of $516 million decreased 23%, reflecting a more challenging environment in derivatives. Securities Services revenues of $647 million decreased 1% on a reported basis, but were largely unchanged in constant dollars, as higher volumes were offset by lower spreads.
ICG net income of $2.9 billion increased 10%, as the revenue growth was partially offset by higher expenses and cost of credit. ICG operating expenses increased 8% to $5.4 billion, driven primarily by higher compensation-related expenses and legal costs. ICG cost of credit included net credit losses of $115 million, compared to $56 million in the prior-year period, and a net loan loss reserve build of $131 million compared to $70 million in the prior-year period, reflecting overall volume growth as well as several episodic downgrades.
Corporate / Other expenses of $635 million increased 34%, primarily reflecting higher infrastructure costs, partially offset by the wind-down of legacy assets.
Corporate / Other loss from continuing operations before taxes of $80 million compared to income of $73 million in the prior-year period as the higher revenues were offset by the increase in expenses.
Corporate / Other income tax benefit benefit of $623 million compared to a benefit of $216 million in the prior-year period, primarily reflecting the benefit of discrete tax items and a pre-tax loss in the current period.
Citigroup will host a conference call today at 11:30 a.m. (ET). A live webcast of the presentation, as well as financial results and presentation materials, will be available at http://www.mencintaimu.com/citi/investor. Dial-in numbers for the conference call are as follows: (866) 516-9582 in the U.S. and Canada; (973) 409-9210 outside of the U.S. and Canada. The conference code for both numbers is 1516368.
Additional financial, statistical, and business-related information, as well as business and segment trends, is included in a Quarterly Financial Data Supplement. Both this earnings release and Citigroup's Fourth Quarter 2019 Quarterly Financial Data Supplement are available on Citigroup's website at www.mencintaimu.com.
Citi, the leading global bank, has approximately 200 million customer accounts and does business in more than 160 countries and jurisdictions. Citi provides consumers, corporations, governments and institutions with a broad range of financial products and services, including consumer banking and credit, corporate and investment banking, securities brokerage, transaction services, and wealth management.
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Certain statements in this release are “forward-looking statements” within the meaning of the rules and regulations of the U.S. Securities and Exchange Commission (SEC). These statements are based on management's current expectations and are subject to uncertainty and changes in circumstances. These statements are not guarantees of future results or occurrences. Actual results and capital and other financial condition may differ materially from those included in these statements due to a variety of factors, including, among others, the efficacy of Citi's business strategies and execution of those strategies, such as those relating to its key investment, efficiency and capital optimization initiatives, governmental and regulatory actions or approvals, various geopolitical and macroeconomic uncertainties, challenges and conditions, for example, changes in monetary policies and trade policies, and the precautionary statements included in this release and those contained in Citigroup's filings with the SEC, including without limitation the “Risk Factors” section of Citigroup's 2018 Form 10-K. Any forward-looking statements made by or on behalf of Citigroup speak only as to the date they are made, and Citi does not undertake to update forward-looking statements to reflect the impact of circumstances or events that arise after the date the forward-looking statements were made.
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1 Citigroup’s total expenses divided by total revenues.
2 Preliminary. Citigroup’s return on average tangible common equity (RoTCE) is a non-GAAP financial measure. RoTCE represents full year net income available to common shareholders as a percentage of average tangible common equity (TCE). For the components of the calculation, see Appendix A.
3 Ratios as of December 31, 2019 are preliminary. For the composition of Citigroup’s Common Equity Tier 1 (CET1) Capital and ratio, see Appendix C. For the composition of Citigroup’s Supplementary Leverage Ratio (SLR), see Appendix D.
4 Citigroup’s payout ratio is the sum of common dividends and common share repurchases divided by net income available to common shareholders. For the components of the calculation, see Appendix A.
5 Citigroup’s tangible book value per share is a non-GAAP financial measure. For a reconciliation of this measure to reported results, see Appendix E.
6 The discrete tax items of approximately $540 million largely relate to an approximately $430 million release of Citi’s valuation allowance related to its Deferred Tax Assets (DTAs).
7 Results of operations excluding the impact of foreign exchange translation (constant dollar basis) are non-GAAP financial measures. For a reconciliation of these measures to reported results, see Appendix B.
8 Credit derivatives are used to economically hedge a portion of the corporate loan portfolio that includes both accrual loans and loans at fair value. Gains / (losses) on loan hedges includes the mark-to-market on the credit derivatives and the mark-to-market on the loans in the portfolio that are at fair value. The fixed premium costs of these hedges are netted against the corporate lending revenues to reflect the cost of credit protection. Citigroup’s results of operations excluding the impact of gains / (losses) on loan hedges are non-GAAP financial measures.