Financial stock under pressure: Citigroup Inc (NYSE: C)

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Citigroup Inc (NYSE: C) stock fell over 4% on 20th April, 2020 (as of 9:01 am GMT-4; Source: Google finance) after the company reported a 46% fall in the first quarter profit as it prepared for losses mainly due to its credit card business, and analysts raised worries that there is more pain to come as the economic outlook darkens. Citi’s U.S. card business that forms 16% of its net income in 2019, were responsible for half of the additional $4.9 billion in reserves the company had set aside at the end of March for expected loan losses. The increase in provisions has led to the US business to report a loss of $837 million in the first quarter. The company said its loss expectations were based on factors including rising unemployment and falling gross domestic product, the outlook for both of which is not good.

C in the first quarter of FY 20 has reported the adjusted earnings per share of $1.05, beating the analysts’ estimates for the adjusted earnings per share of $1.04. The company had reported the adjusted revenue growth of 12 percent to $20.73 billion in the first quarter of FY 20, beating the analysts’ estimates for revenue of $19 billion, according to Refinitiv data. The bank’s total net income fell to $2.52 billion in the three months ended March 31, from $4.71 billion, a year earlier. The company is able to deliver positive operating leverage and a 27% improvement in operating margin. As of March 31, the company’s CET1 capital ratio was 11.2%, below the stated target of 11.5%. Furthermore, the company had over $800 billion in available liquidity to help support the clients.

Moreover, during the quarter, Treasury and Trade Solutions got affected due to the interest rates, but client engagement stayed very strong throughout the period. Investment Banking matched last year’s strong performance, as the company continues to gain share among the target clients.

Global Consumer Banking posted modest performance from a revenue perspective considering the environment. In the U.S., the company had strong revenue growth in cards, branded and retail services, up 7% and 4% respectively. The company grew average deposits to 8%, with another solid portion acquired digitally. In Asia, the company delivered slight revenue decline on the back of the economic impacts of COVID-19 first materialized in that region. In Mexico, revenues increased modestly, excluding a one-time gain from 2019 as the virus had limited impact on that country’s economy during the quarter.

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