Citigroup profit falls on choppy capital markets

NEW YORK Citigroup Inc.s fourth-quarter profit fell 11% from a year earlier as choppy capital markets overshadowed the banks continued recovery from the financial crisis. The global bank made more loans around the world--even in the U.S.--and its capital continues to improve, but a particularly weak fourth-quarter bond market turned dismal in December, hitting Citi at a sensitive spot. Citi reported fourth-quarter earnings of $1.17 billion as revenue fell 7% to $17.17 billion. Citi shares, down 40% over the past 12 months, fell 2.8% in recent premarket activity to $29.89 as results fell well short of analyst expectations. Overall, we made solid progress in 2011, Chief Executive Vikram Pandit said in a press release. But clearly, the macro environment has impacted the capital markets, and we will continue to right-size our businesses to match the environment. The bank blamed a continued weak economic recovery in developed countries, and skittish investors scared by the European debt crisis, but a slew of one-time charges also hurt results. Citi took a $40 million charge tied to the valuation of its own debt and added $557 million to its reserve for litigation. The bank previously announced a $300 million charge because of its Japan operations and a $400 million hit from 4,500 job cuts. An aggressive push abroad has been a boon for Citi, and its strong consumer operation overseas continued to help; however, rocky capital markets left most of Wall Street struggling to improve. Citis fourth-quarter results underline Citis struggle to offset trading, underwriting and advisory results with an upswing in lending. Overall loans rose 14%; international consumer loans rose 6%, excluding the impact of the weak dollar. Citi reported earnings of 38 cents a share, down from 43 cents a share a year earlier. Analysts polled by Thomson Reuters expected a per-share profit of 48 cents on $18.57 billion in revenue.

Similar to its fellow banks, Citi has benefited lately from reducing funds set aside to cover bad loans. Total credit costs in the fourth quarter came in at $4.1 billion, down from $4.84 billion a year earlier and $3.35 billion in the third quarter. Citi reduced its reserve for bad loans by $1.5 billion. Our company has now been profitable for two full years, Pandit told employees in a memorandum Tuesday. Weve shown that we can weather a tough environment without investors, regulators and other observers questioning our safety and soundness. Citicorp, the banks core retail banking and commercial and investment-banking business, saw profit decline 15% from a year ago, to $2.1 billion as revenue fell 2%, to $14.01 billion. Revenue rose in retail banking in Latin America and Asia, but fell in North America and Europe. Capital-markets revenue rose in the region Citi reports as Europe, Middle East and Africa, but fell sharply at all other parts of the world. Equity underwriting and trading, Citis main weak spot, did badly, while revenue from debt underwriting improved 10% from a year earlier but fell from the third quarter. Advisory revenue fell from a year earlier and the third quarter. Profit improved mainly in North Americas retail banking as losses from bad loans declined. Citi Holdings, which includes assets the company is seeking to unload, posted a wider loss as the capital-markets slump hit the retail-brokerage business. The unit has reduced its assets by more than half since its creation in 2009.