Citigroup profit hit by more than $2 billion in charges

NEW YORK (Reuters) - Citigroup Inc posted $2.32 billion of charges for layoffs and lawsuits in its first financial report under new Chief Executive Michael Corbat, who said the bank needs to do better for shareholders.

Earnings rose from a year earlier as trading revenue rebounded, but the result was well below Wall Street expectations and Citi shares were down 3.6 percent in Thursday afternoon trade.

"We are not satisfied with these bottom-line earnings," Corbat told a conference call with analysts, the first time he has addressed them publicly since becoming CEO.

Asked what he would consider a mark of success for Citigroup's turnaround, he said, "We've got to get to a point where we stop destroying our shareholders' capital."

Corbat's remarks left some disappointed.

"It was a stay-tuned type of message," said Tom Lewandowski, an analyst at brokerage Edward Jones who recommends Citi stock. "I expected to hear more than we got," particularly in the way of goals for company performance.

Corbat, who took the reins in mid-October after predecessor Vikram Pandit was ousted, said in an earlier statement that Citi's various businesses were combating competitive and regulatory problems, as well as issues dating to the financial crisis that continue to plague the bank and its peers.

Citi shares rose in Corbat's first three months as CEO, outpacing peers, as some investors welcomed Pandit's departure and anticipated changes in the bank's structure. But analysts said estimates of future earnings are likely to be revised based on what the bank reported on Thursday.

The quarter "falls way short of expectations" on two issues - higher-than-expected legal costs and no significant release of reserves for bad loans, Nomura analyst Glenn Schorr said in a note to clients.

Gary Townsend, president of hedge fund Hill-Townsend Capital LLC, said Citi may have used some discretion in the accounting judgments behind the results.

"It may be that the new CEO is holding back," he said. "There's no reason that the quarter when Pandit left and (Corbat) came in should be great. The board obviously felt in firing Pandit and hiring Corbat that changes needed to be taken, and the fourth-quarter earnings report reflects a great deal of that."

PROFIT MISSES

There was relatively little in the way of 2013 outlook from the bank, though Chief Financial Officer John Gerspach did tell analysts that Citi expects interest margins to be steady in 2013 relative to 2012. Bank investors have had a close eye on margins lately due to fears that falling interest rates could crimp the profitability of lending.

Fourth-quarter net income was $1.2 billion, or 38 cents a share, compared with $956 million, or 31 cents a share, in the same quarter of 2011.

Revenue from fixed income markets increased 58 percent, driving Citi's Securities and Banking segment back to profitability. Company-wide revenue, adjusted for certain items, increased 8 percent, while operating expenses were unchanged.

Results were reduced by new legal costs of $1.29 billion, or 27 cents a share, and a previously announced corporate restructuring charge of $1.03 billion, or 21 cents a share.

Gerspach said $500 million of the new legal costs came from what he called a variety of issues in the ongoing U.S. consumer banking business. He later said he expects legal costs to remain "somewhat elevated."

Expenses recorded for changes in the value of some of the bank's debt and obligations of derivatives counterparties were 10 cents a share, compared with 1 cent a year earlier.

Excluding the many one-time items, Citi said it earned 69 cents per share. On that basis, analysts polled by Thomson Reuters I/B/E/S on average expected 96 cents per share.

The operating earnings were 15 cents below the lowest of the 22 estimates that comprised the consensus forecast. It is the third year in a row that the bank's fourth-quarter results have missed Wall Street forecasts by at least 20 percent, according to Thomson Reuters data.

Citi shares were down $1.53 to $40.95 in Thursday afternoon trading following the results. Through Wednesday's close, the shares had risen 16 percent in the three months since Corbat became CEO, against a 6 percent rise for the KBW banks index.

(Reporting by David Henry and Lauren Tara LaCapra in New York; Writing by Ben Berkowitz; Editing by John Wallace and Tim Dobbyn)

Source: http://news.yahoo.com/citigroup-takes-charges-ceos-first-financial-report-131048560--finance.html

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