Citigroup, which has been working to cut costs and unload troubled assets, continues to struggle under the weight of its mortgage woes.
The bank reported fourth quarter profit of $1.2 billion or 38 cents a share, significantly below analysts estimates. Excluding one-time time items, earnings amounted to 69 cents a share.
Ahead of the bank’s quarterly earnings, analyst estimated earnings at 96 cents a share, according to a survey by Thomson Reuters. Last year, the bank posted profit of $956 million, or 31 cents a share.
The disappointing quarter relates to the ongoing legal problems, as the bank works to clean up the mortgage mess stemming from the financial crisis. In the fourth quarter, Citigroup had $1.3 billion of legal costs and related expenses.
Citigroup has also faced increasing pressure from shareholders to buoy its returns. As part of that push, the bank has been working through a glut of soured loans and unloading less profitable business lines while systematically reducing costs. In December, the bank announced it would cut 11,000 jobs world wide, part of a much larger contraction.
“Our bottom line earnings reflect an environment that remains challenging,” Michael Corbat, the chief executive of Citigroup, said in a statement. “It will take some time to work through the challenges of the current environment but realizing our core earnings potential, as well as improving our returns on assets and tangible equity, are critical goals going forward.”
Beneath the headline numbers, Citigroup did experience gains in some of its businesses.
The bank has been focusing on developing countries, where there is comparatively more growth opportunities than in the United States. Within the global consumer banking group, revenue from international operations increased 4 percent to $4.9 billion in the fourth quarter. Revenue in North America rose 3 percent to $5.3 billion.
Citigroup’s securities and banking group also improved, on the strength of investment banking, equities and fixed income. The unit reported net income of $629 million for the quarter, compared with a $158 million loss.
The fourth quarter earnings are the first under Mr. Corbat’s leadership.
In October, the bank’s powerful chairman, Michael O’Neill, abruptly ousted Vikram S. Pandit as chief executive. Since taking the reins of the bank, Mr. Corbat has vowed to continue revamp the bank, focusing on its core businesses and exiting less profitable areas.
Such efforts have weighed on the bank’s bottom line in the short term. In the fourth quarter, Citigroup’s operating expenses rose 5 percent to $13.8 billion.
Along with its strategic moves, Citigroup also paid for its legal problems. Like rivals, the bank faces claims that it used shoddy documents in foreclosure proceedings that may have led to wrongful evictions.
Earlier this month, Citigroup, along with nine other banks, agreed earlier this month to sign on to an $8.5 billion settlement with the Federal Reserve and the Comptroller of the Currency. The settlement will allow Citigroup to move beyond an expensive review of loans mandated by regulators in 2011.
The costs related to that settlement amounted to $305 million in the latest quarter. Citigroup, however, did not provide any granularity on what accounted for the remainder of the bank’s increased legal costs.
DealBook: Facing Legal Costs, Citigroup Disappoints in 4th Quarter
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DealBook: Facing Legal Costs, Citigroup Disappoints in 4th Quarter
