Citigroup Posts a 27% Drop in 4th Quarter
Citigroup, the world’s largest financial-services company, said Monday that its earnings fell 27% in the latest quarter as declines in investments and corporate banking wiped out gains from its consumer businesses.
Citigroup said profit from operations fell to $1.40 billion, or 60 cents a share, from $1.93 billion, or 80 cents, in the fourth quarter. Analysts expected the company, formed in last year’s merger of Travelers Group Inc. and Citicorp, to earn 56 cents a share, according to a survey by First Call Corp.
The latest results exclude one-time charges of $726 million as Citigroup begins cutting 10,400 jobs, or 6% of its staff.
Profit from consumer businesses, including retail and mortgage banking, rose 20%, paced by an 80% increase at its North American credit card unit.
The consumer gains were wiped out by Citigroup’s investment activities. The company lost $66 million betting with its own capital. Overall, investments earned $1 million, down from $530 million a year earlier.
Corporate banking profit fell 21% as profit at Citigroup’s Salomon Smith Barney, the third-largest U.S. securities firm, plunged 94% to $13 million.
Bond arbitrage at Citigroup lost $54 million in the fourth quarter, contrasted with a gain of $22 million a year ago, said Heidi Miller, the company’s chief financial officer. Citigroup scaled back its global bond-arbitrage business in the second half of 1998.
Salomon Smith Barney’s trading profit dropped 49% to $122.5 million, whereas its employee compensation and benefits rose 11% to $1.62 billion.
Citigroup’s global corporate emerging markets banking income almost tripled to $220 million.
Credit quality in the credit card portfolio improved, as loans 90 days or more past due declined to 1.45% from 1.77% in the fourth quarter of 1997 and 1.49% in the third quarter of 1998.
Consumer profit at insurance unit Travelers Life & Annuity rose 10% to $125 million. Commercial profit rose 17% to $201 million.
Citigroup was “not financially damaged” by Brazil’s currency devaluation earlier this month, said Co-Chairman and CEO John S. Reed. Instead, the company “made a little money,” Reed said in a conference call with journalists.
Brazil devalued its currency, the real, on Jan. 13 and later dropped its defense of the currency. The move raised concern that banks and securities firms with exposure to Brazil would be hurt in the same way they were about six months ago by Russia’s currency devaluation and debt default.
Still, Reed said the bank reported lower fourth-quarter profit in its consumer business in Brazil, which contributed to a 29% decline in earnings in Latin America, to $29 million.
Reed maintained that Latin America is “not likely to be a big item on the agenda this year.”
At a Glance
Other earnings, excluding one-time gains and charges unless noted:
* American Express Co. said its fourth-quarter earnings rose 11.5% to $530 million, or $1.16 a share, meeting forecasts, as revenue rose 8.4% to $5.06 billion. Net income at the charge card and travel unit increased 16% as the company added cardholders and as members spent more on their cards. Earnings at its financial advisors unit grew a better-than-expected 14% as it boosted assets under management. The unit offers mutual funds and other services to investors. Earnings dropped at its American Express Bank, which includes the travelers checks business, primarily because of the economic downturn in Asia, the company said.
* AT&T; Corp., the nation’s largest telephone company, said its profit jumped 42% in the fourth quarter to $1.77 billion, or $1 a share, in line with forecasts of 98 cents to $1.02 a share, as sales rose 4.8% to $13.5 billion and expenses declined. Revenue from business services rose 4.7% but fell 3.6% from consumer services as AT&T; focused on retaining profitable customers. Revenue from wireless services jumped 25%.
AT&T; warned that it will double spending this year on its wireless business and accelerate local network plans, causing it to miss the average first-quarter estimate of $1.02 from First Call. The company said its first-quarter earnings should be in the range of 92 cents to 95 cents a share, something it has been telling analysts. AT&T; said it still expects profit from continuing operations of $4.20 to $4.30 in 1999.
* Baby Bell BellSouth Corp.’s fourth-quarter profit rose 16% to $831 million, or 42 cents a share, a penny higher than estimates, as revenue rose 10% to $6.2 billion, with a big boost from sales of newer services such as data and wireless. BellSouth benefited from its fast-growing southeastern U.S. market where consumers are installing more phone lines to work from home and access the Internet and businesses want high-speed connections.
MORE EARNINGS: C2
