Citi Earnings Miss on Profit and Revenue; Shares Lower

Citigroup quarterly earnings fell well short of analysts' expectations on both profit and revenue, sending shares lower amid a wobby beginning to earnings season for banks.

The global financial services company  delivered fourth-quarter earnings excluding items of 38 cents per share, down from 40 cents in the year-earlier period. The bank blamed the downturn primarily on weaker bond trading and decreased revenue from investment banking.

The company's stock fell 8.2 percent in trading on Tuesday to close at $28.22.

Fourth-quarter net income dropped 11 percent compared to the same period in 2011, primarily due to a $1.2 billion decline in annualized revenues, a $465 million hike in operating expenses, and a $470 million jump in tax provisions, which offset a $2 billion improvement in the cost of credit, which fell 41 percent.

Revenue was $17.2 billion, a nearly 7 percent decrease from $18.37 billion a year ago.

Analysts had expected Citigroup to report earnings excluding items of 49 cents per share on revenue of $18.54 billion, according to Thomson Reuters.

With consumers getting better about paying down their debt, Citi

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[C  Loading...      ()   ] said fourth-quarter net credit losses fell 40 percent to $4.1 billion, while full-year net income grew 6 percent to $11.3 billion.

Citi Holdings, the portion of the bank's operation set up to handle its toxic debt remnants, saw its revenue fall $6.4 billion. That accounted for the largest portion of the $8.2 billion total annual revenue decline to $78.4 billion.

Citi has been reducing the toxic loans in its portfolio — a condition of its $45 billion federal bailout. 

"Overall, we made solid progress in 2011," CEO Vikram Pandit said in a statement. "Clearly, the macro environment has impacted the capital markets and we will continue to right-size our businesses to match the environment."

Citigroup's earnings release follows JPMorgan's

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[JPM  Loading...      ()   ] earnings report on Friday, which missed Wall Street's revenue expectations and drove its shares lower in trading during the day.

The succession of bad earnings could stall the 2012 rally in financials — the second-best performing sector on the Standard & Poor's 500 thus far with a 6.2 percent gain — though Wells Fargo

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[WFC  Loading...      ()   ] turned in earnings results that beat market expectations.

Despite the sharp drop in Citi stock, S&P financials moved modestly higher, while the KBW Bank Index edged lower.

Citi's results looked even weaker considering that the consensus view was sharply lower over just the past several weeks.

"We see this as a very negative reflection on Pandit's ability to run Citigroup," Jeffrey Sica, president and chief investment officer at Sica Wealth Management in Morristown, N.J., told Reuters. "They're blaming it mostly on bond trading, which does not bode well for the future because things just won't get better in that arena."

The volatile stock and bond markets in the fourth quarter led to a decline of 45 percent in Citi's investment banking revenue, to $638 million. The bank made less money on debt and equity underwriting and fees from advising on mergers and acquisitions.

The bank also took a loss of $40 million because of an accounting rule that applies to the value of the corporate debt that the bank sells to investors. The value of that debt rose in the fourth quarter, but the bank had to take a loss because it would have had to pay more to buy it back on the open market.

—The Associated Press contributed to this report.