Citigroup missed earnings projections for the fourth quarter, reporting profits of $1.16 billion, or $0.38 cents a share, compared with the average analyst recommendation of 50 cents a share. That’s cause for worry of course, but we shouldn’t let that obscure the big macro trend, which amounts to a troubling fall in revenue that may not improve anytime soon.
The industry is shrinking and companies seem almost powerless to do anything about it. Fourth quarter revenues for Citigroup fell 7 percent year over year to $17.2 billion. However excluding net debit valuation adjustments, revenues were down even more--12 percent versus a year ago levels.
The decline was largely due to lower revenues in securities and banking. These were nearly 30 percent lower, excluding net debit valuation adjustments, as the bank struggled in fixed income, equity and investment banking. That loss of revenue more than offset a 1 percent rise in regional consumer banking revenue.
The rise in regional banking reflected a surge in international business that offset a 2 percent decline in North America banking business. Transaction service revenue fell 2 percent and Citi Holdings (the bad bank) revenues also fell 30 percent.
All in all, this paints a rather bleak picture of the industry’s direction. For now, the best hope may be for a rise in trading and investment banking activity. There is still no clear answer for the flagging consumer banking side and the dearth of revenue growth engines.
For more:
- here’s the release
- here’s a CNNMoney article
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