The investment bank last week reached a $1.13 billion agreement with mortgage securities investors to settle claims related to the subprime mortgage collapse of 2008 and 2009. Citigroup also announced that it will close about a third of its Korean consumer banks. This came after the Federal Reserve had already rejected the bank’s capital plan in late March, an action the bank also said last week likely means that it will miss its 2015 goal for return on tangible common equity.
The bank reportedly started trimming more jobs last week, according to The Wall Street Journal. An unnamed source said that the cuts have come in the global markets business, which will lose about 2% (200 to 300 workers) of its workforce.
The year-over-year revenue decline in the first quarter was due primarily to a decline in the bank’s fixed income group and to lower mortgage refinancing activity. Net income rose as a result of reduced expenses and lower credit card losses that were partially offset by lower revenues and a higher effective tax rate.
The bank’s CEO said:
Despite a quarter that was difficult for our company, we delivered strong results. Both our consumer and institutional businesses performed well and we grew both loans and deposits while holding the line on our expenses. … Very cognizant of our shareholders desire to see a sustainable return of capital, we are engaged with the Fed to better understand their expectations regarding the CCAR [Comprehensive Capital Analysis and Review, i.e. stress test] process. We are committed to bringing our capital planning process to the highest possible standards, befitting an institution of our global reach. I will dedicate whatever resources and make whatever changes necessary to achieve this critical goal.
Citi increased its estimated Basel III Tier 1 common ratio to 10.4% in the first quarter. Its estimated Basel III supplementary leverage ratio is 5.6%. The bank also raised its tangible book value per share 8% to $56.40.
The bank did not offer guidance in its press release, but the consensus estimates call for second-quarter EPS of $1.22 on revenues of $19.38 billion. The EPS estimate for the 2014 fiscal year is now $4.71.
Shares traded about 3.5% higher in the premarket Monday, at $47.25. The current 52-week range is $44.52 to $55.28. Thomson Reuters had a consensus analyst price target of around $58.50 before the results were announced.
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