Citigroup Shares Drop After Earnings Unexpectedly Decline

(Updates share prices starting in first paragraph.)

Jan. 17 (Bloomberg) -- Citigroup Inc., the third-biggest U.S. bank by assets, dropped 8.2 percent in New York trading after the bank reported an unexpected fall in fourth-quarter earnings on a slump in trading revenue.

The shares fell $2.53 to $28.22 at 4:15 p.m. in New York, the biggest decline on the 24-company KBW Bank Index. Fourth- quarter net income dropped 11 percent, missing analysts' estimates for an increase, to $1.17 billion, or 38 cents a share, from $1.31 billion, or 43 cents, a year earlier, the New York-based company said today in a statement.

Trading declines mirrored results at JPMorgan Chase & Co., which said last week that revenue in every investment-banking business fell from a year earlier. Citigroup's earnings slump capped a year for Chief Executive Officer Vikram Pandit, 55, in which the shares slid 44 percent amid concern troubled European countries would default. The bank said today it would eliminate 5,000 employees, with about 25 percent coming from the securities and banking business, and cut expenses by as much as $3 billion this year.

"The capital-markets business is weak and Citi still has a problem controlling expenses," said Thomas Brown, chief executive officer of Second Curve Capital LLC and a Bloomberg contributing editor, in an interview with Betty Liu on Bloomberg Television's "In the Loop."

Analysts' Survey

Profit adjusted for one-time items was expected to be 51 cents a share, the average estimate of 22 analysts in a Bloomberg survey.

Wells Fargo & Co., the fourth-biggest bank by assets, posted a 20 percent increase in fourth-quarter profit, to $4.11 billion, that beat analysts' estimates on gains from mortgage financing. The San Francisco-based bank's shares climbed 0.7 percent.

"When you look at Wells Fargo versus Citi, you're seeing a contrast in two different companies, one good, one bad," Matthew McCormick, a money manager at Bahl & Gaynor Inc., which oversees about $5.1 billion, said in an interview with Scarlet Fu on Bloomberg Television's "InBusiness With Margaret Brennan." He doesn't see "a balmy future" for Citigroup "and thus I have to advise shareholders to avoid their shares."

Higher Expenses

Citigroup's revenue fell 7 percent to $17.2 billion from a year earlier, the lowest since the fourth quarter of 2009. In addition to the slump in trading, revenue also declined as the company sold off unwanted assets. Expenses climbed 4 percent to $12.9 billion as Pandit continued to invest in the bank's emerging-markets businesses.

For the year, Citigroup's earnings rose 6.4 percent to $11.3 billion, marking the second profitable year for Pandit, who became CEO in December 2007. Citigroup lost a total of $29.3 billion in 2008 and 2009 and took a $45 billion bailout from U.S. taxpayers, which the company later repaid.

Financial institutions are eliminating jobs to compensate for falling revenue, disclosing plans to reduce staff by more than 200,000 worldwide, according to data compiled by Bloomberg. Citigroup had said last month job cuts would total about 4,500.

"The macro environment has impacted the capital markets and we will continue to right-size our businesses to match the environment," Pandit said in today's statement.

Trading Revenue

Revenue from trading stocks and bonds, overseen by James "Jamie" Forese, fell 9.8 percent, including accounting adjustments, from the same period in 2010. The European crisis hurt Citigroup's trading unit as customers took fewer risks with their money, according to Jason Goldberg, a New York-based analyst with Barclays Plc who has an "overweight/positive" rating on the bank's shares.

via sfgate.com

Oil Rises to Three-Day High as Saudi Arabia Is Seen Targeting $100 Crude - Bloomberg

Oil rose to the highest level in three days on speculation that China will intensify monetary stimulus, supporting fuel demand, and as France pushed for a ban on Iranian imports.

France wants a European Union embargo delayed by no more than three months as members seek alternative supplies, an official with knowledge of the matter said yesterday. China’s economy expanded at the slowest pace in 10 quarters, sustaining pressure on Premier Wen Jiabao to ease monetary policy. Saudi Arabia aims to stabilize the average of crude prices worldwide at $100 a barrel in 2012, Oil Minister Ali al-Naimi said in an interview with CNN yesterday.

via bloomberg.com