Written by Brenda Nakalema

Citigroup’s stock still falling despite adjusted earnings topping expectations

Citigroup stock remained falling Friday after the bank posted a mixed bowl of fourth-quarter earnings. Citigroup (Ticker: C) reported a …

Citigroup stock remained falling Friday after the bank posted a mixed bowl of fourth-quarter earnings. Citigroup (Ticker: C) reported a net income of $3.2 billion, a 26% drop from its earnings a year ago. According to the bank, the lacklustre performance is blamed on an increase in expenses- expenses rose 18% to $13.5 billion in the quarter.

Despite these figures, adjusted earnings of $1.99 a share and revenue of $17 billion were above expectations of $1.71 on $16.85 billion in revenue. By Friday, Citigroup shares were down nearly 2% at $66.39.

The company earned revenue from $2.5 billion and $785 million from fixed income and equity markets trading, respectively, in the quarter. Both figures fell short of analyst expectations of $2.83 billion and $866.7 billion.

Citigroup CEO, Jane Fraser, asserted that the company experienced a decent end to 2021, driving net income for the year up to $22 billion. It was a far better credit environment than the previous year, she asserted.

The news investors will be keen to hear is the company’s plan to exit retail banking in 13 markets across Asia and Europe as part of a strategic refresh during the earnings call.

In an announcement to stakeholders, the bank specified that Singapore’s United Overseas Bank is buying its consumer banking businesses in Indonesia, Malaysia, Thailand, and Vietnam. Citigroup also announced its intention to exit its Mexico consumer, small-business, and middle-market banking operations. Those watching closely might have to wait until its March Investor Day to get a detailed explanation and timeline for these huge changes.

The March Investor Day will give Fraser a huge opportunity to put out some targets and frame the conversation around the company’s future. A Morningstar analyst, Eric Compton, said he would be watching out for projections on expense growth and if the bank expects 2022 revenue to be flat.

According to Barclay’s analyst, Jason Goldberg, the initial outlook for Citigroup in 2022 “includes improved net interest income, lower fee income, and increased expenses, likely resulting in near-term negative operating leverage.”

Citigroup’s stock fell 2% over the previous four quarters but was on a steep incline earlier in the year, with prices up 9.6% to date. One leading factor is the rising interest rates, which boosted the stocks of most large-cap banks. Bank of America (ticker: BAC) was up 7.1%, while the KBW Nasdaq Bank Index rose 10% this year.

Other banks also reported earnings on Friday, such as JPMorgan Chase (ticker: JPM) and Wells Fargo (ticker: WFC) reported earnings that absolutely winded analyst expectations.