Citigroup just reported third quarter earnings results beating Wall Street analyst estimates. For the quarter, the bank reported adjusted EPS $1.15. On average, analysts expected the bank to report adjusted EPS of $1.12. Revenue for the third quarter came in at $19.6 billion beating estimates of $19.08 billion. Shares of Citi were up more than 2.5% in the pre-market following the earnings report. In the release, Citigroup also said that it intends to exit 11 consumer-banking markets worldwide. Those markets include, Costa Rica, Czech Republic, Egypt, El Salvador, Guam, Guatemala, Hungary, Japan, Nicaragua, Panama and Peru, as well as the consumer finance business in Korea. "I am committed to simplifying our company and allocating our finite resources to where we can generate the best returns for our shareholders. While we have made progress optimizing these 11 consumer markets, we believe our Global Consumer Bank will achieve stronger performance by focusing on the countries where our scale and network provide a competitive advantage," Corbat said in a statement. Here's the earnings release: Citigroup Reports Third Quarter 2014 Earnings per Share of $1.07; $1.15 Excluding CVA/DVA1 Announces Strategic Actions in Global Consumer Banking to Reduce Footprint from 35 to 24 Markets Net Income of $3.4 Billion; $3.7 Billion Excluding CVA/DVA Revenues of $19.6 Billion; $20.0 Billion Excluding CVA/DVA Net Interest Margin Increased to 2.91% Net Credit Losses of $2.1 Billion Declined 14% Versus Prior-Year Period Utilized Approximately $700 Million of Deferred Tax Assets Basel III Tier 1 Common Ratio of 10.7%2 Estimated Basel III Supplementary Leverage Ratio of 6.0%3 Book Value Per Share Increased to $67.31Tangible Book Value Per Share4 Increased To $57.73 Citi Holdings Assets of $103 Billion Declined 16% from Prior-Year Period and Represented 5% of Total Citigroup Assets at Quarter End New York – Citigroup Inc. today reported net income for the third quarter 2014 of $3.4 billion, or $1.07 per diluted share, on revenues of $19.6 billion. This compared to net income of $3.2 billion, or $1.00 per diluted share, on revenues of $17.9 billion for the third quarter 2013. CVA/DVA was negative $371 million (negative $228 million after-tax) in the third quarter 2014, including a $474 million pre-tax charge related to Citigroup's implementation in the quarter of funding valuation adjustments (FVA)1, compared to negative $336 million (negative $208 million after-tax) in the prior year period. Third quarter 2013 results also included a $176 million tax benefit related to the resolution of certain tax audit items (recorded within Corporate/Other). Excluding CVA/DVA and the tax benefit in the third quarter 20135, earnings were $1.15 per diluted share, a 13% increase from prior year earnings of $1.02 per diluted share. Michael Corbat, Chief Executive Officer of Citi, said, "Our consumer bank and institutional business each had solid performance during the quarter and generated stronger revenues both sequentially and year-on-year. The revenue improvement was evident across regions and products. With Citi Holdings again turning a profit and the utilization of additional deferred tax assets, we again demonstrated progress against two execution priorities and increased our capital base. We also continued our work to strengthen our capital planning process to meet the critical goal of returning capital to our shareholders." Strategic Actions: Global Consumer BankingCitigroup today announced strategic actions to accelerate the transformation of Global Consumer Banking (GCB) by focusing on those markets where it has the greatest scale and growth potential. As a result, Citigroup intends to exit its consumer businesses in 11 markets. The new consumer banking footprint will serve nearly 57 million clients in 24 markets that capture over 95% of GCB's existing revenue base, while further simplifying its operations and improving its performance. The affected businesses include the consumer franchises in Costa Rica, Czech Republic, Egypt, El Salvador, Guam, Guatemala, Hungary, Japan, Nicaragua, Panama and Peru, as well as the consumer finance business in Korea. Active sales processes are underway for the majority of the businesses, and subject to market conditions and regulatory and other approvals, the strategic actions are currently expected to be substantially completed by year-end 2015. The businesses will be reported as part of Citi Holdings as of the first quarter 2015 to provide greater transparency with respect to the performance of the ongoing operations reported in GCB. Citigroup's Institutional Clients Group (ICG) will continue to serve clients in these markets. "I am committed to simplifying our company and allocating our finite resources to where we can generate the best returns for our shareholders. While we have made progress optimizing these 11 consumer markets, we believe our Global Consumer Bank will achieve stronger performance by focusing on the countries where our scale and network provide a competitive advantage," Mr. Corbat concluded. Manuel Medina-Mora, Citi Co-President and CEO of GCB, said: "Today's actions are the next step in the execution of our strategy to build an urban-based, globally integrated consumer bank. Since 2009, the Global Consumer Bank has become more streamlined, efficient and profitable. Focusing our presence in 100 cities across both the U.S. and top emerging markets where we have the greatest scale and growth potential positions us to win." Third Quarter Financial ResultsRead the full press release with tables. CitigroupCitigroup revenues of $19.6 billion in the third quarter 2014 increased 9% from the prior year period. Excluding CVA/DVA, revenues of $20.0 billion increased 10% from the prior year period. This increase was driven by 8% growth in Citicorp revenues, due to increased revenues in both ICG and GCB, and a 30% increase in Citi Holdings revenues. Citigroup's net income rose 7% to $3.4 billion in the third quarter 2014 from $3.2 billion in the prior year period. Excluding CVA/DVA in both periods and the tax benefit in the prior year period, Citigroup net income of $3.7 billion increased 13% versus the prior year period, driven by higher revenues and a decline in credit costs, partially offset by higher operating expenses. Operating expenses were $12.4 billion in the third quarter 2014, 6% higher than the $11.7 billion in the prior year period, driven by higher legal and related expenses and repositioning costs in Citicorp (largely in Corporate/Other), an adjustment to incentive compensation expense as a result of better than anticipated performance year-to-date in ICG, and higher regulatory and compliance costs, partially offset by continued cost reduction initiatives and the overall decline in Citi Holdings assets. Operating expenses in the third quarter 2014 included legal and related expenses of $951 million, compared to $677 million in the prior year period, and $382 million of repositioning charges, compared to $133 million in the prior year period. Citigroup's cost of credit in the third quarter 2014 was $1.8 billion, a decrease of 11% from the prior year period, primarily reflecting a $333 million improvement in net credit losses, partially offset by a lower net release of loan loss reserves. Citi's effective tax rate was 36% in the current quarter, an increase from 30% in the prior year period, excluding CVA/DVA in both periods and the tax benefit in the prior year period, driven in part by a higher level of non-tax-deductible legal accruals and higher tax costs related to Citigroup's sales of its consumer operations in Greece and Spain, each in the current period. Citigroup's allowance for loan losses was $16.9 billion at quarter end, or 2.60% of total loans, compared to $20.6 billion, or 3.16% of total loans, at the end of the prior year period. The $552 million net release of loan loss reserves in the current quarter compared to a $675 million release in the prior year period. Citigroup asset quality continued to improve as total non-accrual assets fell to $8.0 billion, a 19% reduction compared to the third quarter 2013. Corporate non-accrual loans declined 38% to $1.4 billion, while consumer non-accrual loans declined 13% to $6.3 billion. Citigroup's loans were $654 billion and deposits were $943 billion as of quarter end, each down 1% from the prior year period. On a constant dollar basis7, Citigroup's loans grew by 1%, as growth in Citicorp was partially offset by continued declines in Citi Holdings driven primarily by the North America mortgage portfolio, and deposits were largely unchanged. Citigroup's capital levels and book value per share increased versus the prior year period. As of quarter end, book value per share was $67.31 and tangible book value per share was $57.73, 4% and 6% increases, respectively, versus the prior year period. At quarter end, Citigroup's Basel III Tier 1 Common ratio was 10.7%, up from 10.5% in the prior year period, largely driven by earnings and the utilization of deferred tax assets (DTA). Citigroup utilized approximately $700 million of DTA in the third quarter 2014 and $2.9 billion year-to-date 2014. Citigroup's estimated Basel III Supplementary Leverage ratio for the third quarter 2014 was 6.0% as calculated under the revised final U.S. Basel III rules, up from 5.1% in the prior year period.3 CiticorpCiticorp revenues of $18.0 billion in the third quarter 2014 increased 8% from the prior year period. CVA/DVA, reported within ICG, was negative $316 million in the third quarter 2014 (negative $194 million after-tax), compared to negative $332 million (negative $206 million after-tax) in the prior year period. Excluding CVA/DVA, revenues were up 8% from the third quarter 2013, reflecting increases in ICG and GCB revenues of 13% and 4%, respectively. Corporate/Other revenues were $8 million versus $42 million in the prior year period, primarily due to hedging activities. Citicorp net income decreased 4% from the prior year period to $3.2 billion. Excluding CVA/DVA and the tax benefit in the prior year period, net income increased 1% compared to the prior year period, as higher revenues and continued improvement in credit were partially offset by higher operating expenses. Citicorp operating expenses increased 11% from the prior year period to $11.5 billion primarily reflecting higher legal and related expenses and repositioning charges, an adjustment to incentive compensation expense in ICG, and higher regulatory and compliance costs, partially offset by continued efficiency savings. Citicorp cost of credit of $1.4 billion in the third quarter 2014 declined 25% from the prior year period. The decline reflected a 3% decline in net credit losses and a higher net loan loss reserve release, which increased $412 million versus the prior year period. Citicorp's consumer loans 90+ days delinquent increased 2% from the prior year period to $2.8 billion, but the 90+ days delinquency ratio remained roughly stable at 0.92% of loans. Citicorp end of period loans grew 3% versus the prior year period to $576 billion, with 3% growth in corporate loans to $277 billion and 2% growth in consumer loans to $299 billion. On a constant dollar basis, Citicorp end of period loans grew 4% versus the prior year period, with 5% growth in corporate loans and 3% growth in consumer loans. Global Consumer BankingGCB revenues of $9.6 billion increased 4% from the prior year period, driven by growth in North America, Latin America and Asia. GCB net income rose 26% versus the prior year period to $1.9 billion, reflecting the increase in revenues and a lower cost of credit, partially offset by higher operating expenses. Operating expenses increased 2% to $5.3 billion versus the prior year period, mostly reflecting higher legal and related expenses and repositioning charges, partially offset by ongoing cost reduction initiatives. North America GCB revenues rose 5% to $5.0 billion versus the prior year period reflecting higher revenues in each of retail banking, Citi-branded card and Citi retail services. Retail banking revenues rose 9% to $1.2 billion from the third quarter 2013, reflecting 9% growth in average loans and 2% growth in average deposits, as well as higher revenues in the U.S. mortgage business driven by a repurchase reserve release of approximately $50 million in the current quarter. Citi-branded cards revenues of $2.1 billion were up 1% versus last year, as purchase sales grew and an improvement in spreads mostly offset the impact of lower average loans. Citi retail services revenues increased 8% to $1.6 billion, mainly reflecting the impact of the Best Buy portfolio acquisition. North America GCB net income was $1.2 billion, up 33% versus the third quarter 2013, driven by the increase in revenues, a decline in net credit losses and a higher loan loss reserve release. Operating expenses were slightly lower versus the prior year period at $2.4 billion, as ongoing cost reduction initiatives were partially offset by the impact of higher expenses associated with the Best Buy portfolio and increased legal and related expenses and repositioning charges. North America GCB credit quality continued to improve as net credit losses of $1.0 billion decreased 6% versus the prior year period. Net credit losses improved versus the prior year period in Citi-branded cards (down 14% to $526 million) but increased 5% in Citi retail services to $457 million, due to the Best Buy portfolio acquisition. Delinquency rates continued to improve in both Citi-branded cards and Citi retail services. The reserve release in the third quarter 2014 was $340 million, $115 million higher than in the third quarter 2013, due to the continued improvement in each of the cards portfolios. International GCB revenues increased 3% versus the third quarter 2013 to $4.6 billion. On a constant dollar basis, international GCB revenues were up 5% versus the third quarter 2013, with growth in each region. In constant dollars, revenues in Latin Americaincreased 6% to $2.4 billion as volume growth more than offset spread compression. InAsia, revenues rose by 4% to $1.9 billion primarily due to volume growth and an increase in investment sales revenues, partially offset by the ongoing impact of regulatory changes and the franchise repositioning in Korea. In EMEA, revenues increased 1% to $347 million due to higher volumes, partially offset by the previously-announced market exits in 2013. International GCB net income increased 16% from the prior year period to $742 million, and increased 22% in constant dollars. On a constant dollar basis, higher revenues and lower credit costs more than offset higher operating expenses. Operating expenses in the third quarter 2014 increased 5% in constant dollars (increased 4% on a reported basis) as higher legal and related expenses and repositioning charges, the impact of business growth and higher regulatory and compliance costs were partially offset by ongoing efficiency savings. Credit costs declined 13% versus the prior year period driven by a net loan loss reserve release in the current quarter. International GCB credit quality primarily reflected portfolio seasoning as well as the ongoing impact of fiscal reforms and slower economic growth in Mexico. Net credit losses rose 11% to $721 million, primarily reflecting the impact of portfolio growth as well as portfolio seasoning in Latin America. The international net credit loss rate was 1.99% of average loans in the third quarter 2014, compared to 1.89% in the prior year period. Institutional Clients GroupICG revenues rose 14% from the prior year period to $8.4 billion. Excluding the impact of CVA/DVA, revenues were $8.7 billion, 13% higher than the prior year period, reflecting higher revenues in each of Banking and Markets and Securities Services. Banking revenues of $4.3 billion increased 11% from the prior year period, primarily reflecting growth in Investment Banking revenues. Investment Banking revenues increased 32% versus the prior year period, driven by a 90% increase in advisory revenues to $318 million, a 51% increase in equity underwriting revenues to $298 million, and a 9% increase in debt underwriting revenues to $632 million. Private Bankrevenues increased 8% to $663 million from the prior year period (excluding negative $6 million of CVA/DVA) as growth in client volumes was partially offset by the impact of spread compression. Corporate Lending revenues rose 17% versus the prior year period to $442 million reflecting growth in average loans and improved funding costs, partially offset by lower loan yields. Treasury and Trade Solutions revenues of $2.0 billion were up 1% versus the prior year period as volume and fee growth was partially offset by the impact of spread compression globally. Markets and Securities Services revenues of $4.3 billion (excluding negative $310 million of CVA/DVA, versus negative $326 million in the third quarter 2013) rose 8% from the prior year period. Fixed Income Markets revenues of $3.0 billion in the third quarter 2014 (excluding negative $306 million of CVA/DVA) increased 5% from the prior year period reflecting strength in securitized products as well as an improvement in rates and currencies. Equity Markets revenues of $763 million (excluding negative $4 million of CVA/DVA) were up 14% versus the prior year period, reflecting improved client activity in derivatives. Securities Services revenues of $600 million grew 8% versus the prior year period due to increased client balances and activity. ICG net income was $2.3 billion in the third quarter 2014. Excluding CVA/DVA, net income of $2.5 billion grew 29% from the prior year period, primarily reflecting the increase in revenues and improved credit costs, partially offset by an increase in operating expenses. Operating expenses grew 3% to $5.0 billion due to an adjustment to incentive compensation expense as a result of better than anticipated performance year-to-date, higher regulatory and compliance costs and higher repositioning charges, partially offset by ongoing efficiency savings. ICG average loans grew 7% versus the prior year period to $278 billion while end of period deposits remained roughly unchanged at $567 billion. In constant dollars, average loans were up 7% versus the prior year period, while end of period deposits increased 2%. Citi HoldingsCiti Holdings revenues in the third quarter 2014 increased 26% versus the prior year period to $1.6 billion. Revenues in the third quarter 2014 included CVA/DVA of negative $55 million, compared to negative $4 million in the prior year period. Excluding CVA/DVA, Citi Holdings revenues increased 30%, primarily driven by gains on the sales of consumer operations in Greece and Spain as well as lower funding costs, partially offset by losses on the redemption of debt associated with funding Citi Holdings assets. As of the end of the quarter, Citi Holdings assets were $103 billion, 16% below the prior year period, and represented approximately 5% of total Citigroup assets. Citi Holdings net income was $238 million in the third quarter 2014, compared to a net loss of $115 million in the prior year period. Excluding CVA/DVA, net income was $272 million, up from a loss of $113 million in the prior year period, reflecting the higher revenues, lower operating expenses and lower net credit losses, partially offset by a lower net loan loss reserve release. Operating expenses in the third quarter 2014 declined 36% from the prior year period, principally reflecting lower legal and related expenses ($126 million in the third quarter 2014, compared to $595 million in the prior year period) as well as productivity savings and the ongoing decline in Citi Holdings assets, partially offset by $59 million of costs related to the sales of the consumer operations in Greece and Spain. Net credit losses decreased 45% from the prior year period to $347 million, primarily driven by continued improvements in the North Americamortgage portfolio. The net loan loss reserve release decreased 79% from the prior year period to $144 million, primarily due to lower releases related to the North Americamortgage portfolio. Citi Holdings allowance for credit losses was $5.0 billion at the end of the third quarter 2014, or 6.44% of loans, compared to $7.3 billion, or 7.59% of loans, in the prior year period. 90+ days delinquent consumer loans in Citi Holdings decreased 29% to $2.1 billion, or 2.93% of loans. Citigroup will host a conference call today at 11:30 a.m. (ET). A live webcast of the presentation, as well as financial results and presentation materials, will be available athttp://www.citigroup.com/citi/investor. Dial-in numbers for the conference call are as follows: (866) 516-9582 in the U.S. and Canada; (973) 409-9210 outside of the U.S. and Canada. The conference code for both numbers is 90833821. Join the conversation about this story »
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