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Citigroup Smashes Q4 Earnings Forecast On $1.5 Billion Reserve Release, But Revenues Slide

Citigroup followed JPMorgan with much stronger-than-expected fourth quarter earnings driven in part by the release of billions in previously-booked credit loss provisions.

Citigroup  (C) - Get Citigroup Inc. Report posted stronger-than-expected fourth quarter earnings Friday thanks in part to a $1.5 billion reserve release, but softer revenues pushed shares lower in pre-market trading. 

Citigroup said earnings for the three months ending in December were pegged at $2.09 per share, up 59.5% on an adjusted basis from the same period last year and firmly ahead of the Street consensus forecast of $1.31 per share. Group revenues, Citigroup said, fell 10.3% to $16.5 billion, missing analysts' estimates of a $16.7 billion tally.

Citigroup said it released around $1.5 billion linked to the release of previous credit loan provisions, but noted its year-end allowance for bad loans was measured at around $25 billion.

“We ended a tumultuous year with a strong fourth quarter. As a sign of the strength and durability of our diversified franchise, our revenues were flat to 2019, despite the massive economic impact of COVID-19. For the year, we generated $11 billion in net income despite our credit reserves increasing by $10 billion as a result of the pandemic and the impact of CECL.," said CEO Michael Corbat. 

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“We remain very well capitalized with robust liquidity to serve our clients. Our CET 1 ratio increased to 11.8%, well above our regulatory minimum of 10%,: he added. "Our Tangible Book Value per share increased to $73.83, up 5% from a year ago. Given the Federal Reserve decision regarding share repurchases as we have excess capital we can return to shareholders, we plan to resume buybacks during the current quarter."

Citigroup shares were marked 4% lower in early trading following the earnings release to change hands at $66.25 each.

Earlier Friday, Citigroup's larger rival, JPMorgan  (JPM) - Get JP Morgan Chase & Co. Report, posted much stronger-than-expected fourth quarter earnings as investment banking profits surged and the group booked a benefit of $1.9 billion from its earlier credit provisions.

The $1.9 billion benefit was linked to a $2.9 billion release of previous credit loan provisions, JPMorgan said, "reflecting an improvement in the macro-economic scenarios and the continued ability of clients to access liquidity and capital markets." 

Investment banking revenue, JPMorgan said, surged 37% to $2.5 billion, while revenues in the group's fixed income division rose to $4 billion.