Citi profit halves as US banks brace for coronavirus impact
Citigroup’s profit slumped almost 50 per cent in the first quarter as it became the latest US bank to beef up its loan reserves in a bid to mitigate the impact of coronavirus.
The bank’s net income dropped 46 per cent year on year to $2.5bn (£2bn), or $1.05 per share. This was down from $4.7bn, or $1.87 per share in 2019.
Revenue rose 12 per cent to $20.7bn in the three-month period, which Citi said was driven by fixed-income and equity trading amid market volatility caused by the pandemic.
Like other Wall Street giants such as Goldman Sachs, JP Morgan and Bank of America, Citi said it was preparing for a huge rise in loan defaults as Covid-19 brings economic activity almost to a standstill.
The bank booked a $4.9bn expense to increase its reserves for loan losses — largely from credit cards due to rising unemployment.
Shares in Citigroup have fallen more than 40 per cent since the outbreak of coronavirus, and were down roughly four per cent in afternoon trading today.
“Our earnings for the first quarter were significantly impacted by the Covid-19 pandemic,” said Citi chief executive Michael Corbat.
“We managed our expenses with discipline and had good revenue performance as the economic shocks caused by the pandemic weren’t felt until late in the quarter. However, the deteriorating economic outlook and the transition to the new Current Expected Credit Loss standard (CECL) caused us to build significant loan loss reserves.”
Last month Citi said it would give a $1,000 bonus to employees who earned less than $60,000 to help “ease the financial burden” of the pandemic.
Bank of America and Goldman Sachs were also trading lower today after reporting a slump in profit for the first quarter.