Citigroup (C) - Get Report on Wednesday revealed a starkly negative snapshot of its most recent quarter, posting earnings that were 46% lower than a year ago as it bulked up its loan-loss reserves by nearly $5 billion.
Citigroup said it earned $1.05 a share in the quarter ended March 31, down from $1.87 a year ago and below analysts' forecasts of $1.07 a share. Revenue came in at $20.7 billion, up 12% from the year-earlier period.
Net income was $2.52 billion, almost half of what it was in the first quarter of 2019. But the company noted revenue was up 12% because of higher fixed-income and equity-market trading revenue.
“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," Citigroup CEO Michael Corbat said in a statement.
However, the deteriorating economic outlook and the transition to the so-called Current Expected Credit Loss standard (CECL) "... caused us to build significant loan-loss reserves," he said.
One particular eyebrow-raising metric in Citigroup's earnings vs. its peers was its cost of credit, which surged to $7 billion in the first quarter of 2020 compared to $2 billion in the prior-year period - a reflection of its fixed-income holdings.
Another eyebrow-raiser: the bank's allowance for future loan losses, which rose to $20.8 billion at the end of the quarter, or 2.91% of total loans, compared to $12.3 billion, or 1.82% of total loans at the end of the prior-year period.
Still, there was some positive news from the bank's investment banking division, which saw revenue increase 25% to $12.5 billion thanks to strong performance in capital markets and mark-to-market gains on loan hedges, which partially offset lower revenue in corporate lending and treasury and trade solutions.
The bank’s consumer banking division posted a loss of $754 million for the quarter vs. net income of $1.3 billion a year ago.
Shares of Citigroup were down 9.77% at $18.94 in trading on Wednesday. Citigroup shares have tumbled more than45% since the start of the year.