CITIGROUP trounced analysts' first-quarter profit estimates on Thursday as its outlook for an economic recovery driven by vaccinations and government stimulus allowed it to release reserves set aside for loan losses from the pandemic.
The group said it will exit its consumer businesses in 13 markets across Asia and EMEA (Europe, Middle East and Africa), as part of a broader strategic review under new CEO Jane Fraser.
Like JPMorgan Chase, which reported earnings on April 14, Citi benefited from a boom in capital markets activity, but its consumer bank felt the impact of low interest rates that hurt earnings. Revenue fell 7 per cent on low interest rates and a 10 per cent decline in loans, largely due to lower consumer credit card loan balances. Partially offsetting the drag from interest revenue, investment banking revenue surged 46 per cent on stronger equity underwriting fees. Citi has been a Wall Street leader in raising money for the so-called blank-cheque firms or special purpose acquisition companies.
As part of its consumer sector shuffle, Citi will divest those businesses in countries like Australia, China and India. "While the other 13 markets have excellent businesses, we don't have the scale we need to compete," Ms Fraser said in a statement. Citi said its Institutional Clients Group will continue to offer services to clients and that it will continue to operate "wealth centres" in Singapore and Hong Kong, as well as London and the United Arab Emirates. It gave no time frame for the exits.
The divestment move is the latest step in Ms Fraser's drive to simplify the once far-flung Citi consumer business and improve shareholder returns.
Amol Gupte, Asean head and Citi country officer Singapore, said: "As a leading international financial centre, Singapore is a critical hub for Citi, serving as a global gateway for our clients in Asia and across the world. Our business strategy recognises the important role that the country plays for our consumer and wealth management businesses, as well as our institutional business."
In December, Citi opened its largest wealth advisory hub globally in Singapore. Singapore is Citi's largest forex hub in Asia, and is the regional liquidity hub for the bank.
For the first quarter, net income tripled to US$7.94 billion, or US$3.62 per share, from US$2.54 billion, or US$1.06 per share, a year earlier. Analysts on average had expected a profit of US$2.60 per share, according to Refinitiv IBES data. The bank's bottom line was bolstered by its decision to draw down US$3.85 billion in reserves it had built up for expected loan losses from the pandemic. A year earlier, it had added US$4.88 billion to its loss reserves. REUTERS