Reuters logo
Fitch: Citi's 3Q'16 Results Helped by Markets, Offset by Consumer
October 14, 2016 / 7:41 PM / a year ago

Fitch: Citi's 3Q'16 Results Helped by Markets, Offset by Consumer

(The following statement was released by the rating agency) CHICAGO, October 14 (Fitch) Citigroup (Citi) has reported a 0.83% return on assets (ROA) in the third quarter of 2016 (3Q'16), results which are lower on a sequential basis and from those reported a year ago, according to Fitch Ratings. Quarterly earnings included higher provision expenses on both a linked-quarter and year-ago basis and lower reported revenues from a year ago, which was partially offset by higher core revenues and well-controlled operating expenses. The year-ago comparisons included two non-recurring items, a gain on a sale of merchant acquiring business in Mexico and the reversal of prime brokerage valuation adjustment. Excluding these two items, Citicorp revenues improved 2.4% from a year ago. Quarterly revenue comparisons were not impacted by any one-time gains and improved 1% on a linked-quarter basis in Citicorp. Citi recently announced the sales of its retail operations in Argentina and Brazil reflecting the company's ongoing strategy of shifting resources to higher returning areas. During the quarter, Citi announced it plans to invest more than $1 billion in its Mexican business, which was rebranded as Citibanamex. In terms of North America Consumer Banking, net income declined on both a linked-quarter and year-ago basis. While the quarter's results reflected a full quarter's impact of the Costco portfolio, which was acquired on June 17, it also included higher provision and operating expenses, partially offset by higher revenues. Citi noted that the Costco loan portfolio had grown to over $14 billion at quarter-end, up from approximately $10.6 billion at acquisition. A third of the loan loss reserve build was attributed to Costco given that the loans came over with no loan loss reserves, while another third reflected CFPB guidance on third party collections. The remaining reserve build was attributed to portfolio growth. While provision expenses increased 32% on a sequential basis, net charge-offs improved 3% in nominal terms. In Branded Cards, net credit losses declined to 225bps. However, excluding Costco, which did not incur any losses in 3Q16, the NCO rate in Branded was approximately 280bps year-to-date. Citi expects this to be the run-rate for NCOs in 2017. For Retail Services, loan losses tend to be higher and were 410bps year-to-date. Citi expects them to modestly deteriorate in 2017, up to 435bps for the year, primarily reflecting seasoning and the aforementioned regulatory guidance. Citi also disclosed that higher operating expenses were primarily driven by the addition of Costco, volume growth, and continued marketing investments. Citi continues to reshape its retail banking footprint, focusing on its core six urban markets. The bank has begun to invest in additional growth, with improving digital and mobile capabilities, and additional dedicated CitiGold centers. With regard to International Global Consumer Banking, net income improved 1% on a linked-quarter basis, but fell 15% from the prior year, in constant dollars. Year-ago comparisons include the aforementioned impact of the sale of Citi's merchant acquiring business. Excluding this, revenues would have improved both from a year ago and a quarter ago. Similar to North America Consumer Banking, Citi reported loan loss reserve building Latin America. In terms of the Institutional segment, fixed income revenues improved 35% from a year ago reflecting strength in both rates and currencies and spread products. This was partially offset by a decline of 34% from a year ago in Equity Markets (down 23% when excluding a prime finance adjustment reversal last year) due to lower client activity and by strong performance in Asia last year. Citi also reported continued progress in Banking, with solid performance in Investment Banking and Treasury & Trade Solutions. With regard to credit, non-accrual balances declined 3% on a linked-quarter basis with improvements in both consumer and commercial. Early stage and late stage day delinquencies increased in nominal and percentage terms on a linked-quarter basis. In terms of Citi's exposure to energy in ICG, Citi reported a reduction in both funded and total exposure, with a still relatively high 74% of exposures rated investment grade. Citi's capital ratios continue to remain very good and generally above global peers. The company's estimated Common Equity Tier 1 under Basel III on a fully phased-in basis increased again to an estimated 12.6%. The approximate 10 bps improvement from last quarter was due primarily to net income. Contact: Julie Solar Senior Director +1-312-368-5472 Fitch Ratings, Inc. 70 West Madison St. Chicago, IL 60602 Meghan Neenan Senior Director +1-212-908-9121 Media Relations: Hannah James, New York, Tel: + 1 646 582 4947, Email: Additional information is available at ''. ALL FITCH CREDIT RATINGS ARE SUBJECT TO CERTAIN LIMITATIONS AND DISCLAIMERS. PLEASE READ THESE LIMITATIONS AND DISCLAIMERS BY FOLLOWING THIS LINK: here. IN ADDITION, RATING DEFINITIONS AND THE TERMS OF USE OF SUCH RATINGS ARE AVAILABLE ON THE AGENCY'S PUBLIC WEB SITE AT WWW.FITCHRATINGS.COM. PUBLISHED RATINGS, CRITERIA, AND METHODOLOGIES ARE AVAILABLE FROM THIS SITE AT ALL TIMES. FITCH'S CODE OF CONDUCT, CONFIDENTIALITY, CONFLICTS OF INTEREST, AFFILIATE FIREWALL, COMPLIANCE, AND OTHER RELEVANT POLICIES AND PROCEDURES ARE ALSO AVAILABLE FROM THE CODE OF CONDUCT SECTION OF THIS SITE. FITCH MAY HAVE PROVIDED ANOTHER PERMISSIBLE SERVICE TO THE RATED ENTITY OR ITS RELATED THIRD PARTIES. DETAILS OF THIS SERVICE FOR RATINGS FOR WHICH THE LEAD ANALYST IS BASED IN AN EU-REGISTERED ENTITY CAN BE FOUND ON THE ENTITY SUMMARY PAGE FOR THIS ISSUER ON THE FITCH WEBSITE. Copyright © 2016 by Fitch Ratings, Inc., Fitch Ratings Ltd. and its subsidiaries. 33 Whitehall Street, NY, NY 10004. Telephone: 1-800-753-4824, (212) 908-0500. Fax: (212) 480-4435. Reproduction or retransmission in whole or in part is prohibited except by permission. All rights reserved. In issuing and maintaining its ratings and in making other reports (including forecast information), Fitch relies on factual information it receives from issuers and underwriters and from other sources Fitch believes to be credible. Fitch conducts a reasonable investigation of the factual information relied upon by it in accordance with its ratings methodology, and obtains reasonable verification of that information from independent sources, to the extent such sources are available for a given security or in a given jurisdiction. The manner of Fitch's factual investigation and the scope of the third-party verification it obtains will vary depending on the nature of the rated security and its issuer, the requirements and practices in the jurisdiction in which the rated security is offered and sold and/or the issuer is located, the availability and nature of relevant public information, access to the management of the issuer and its advisers, the availability of pre-existing third-party verifications such as audit reports, agreed-upon procedures letters, appraisals, actuarial reports, engineering reports, legal opinions and other reports provided by third parties, the availability of independent and competent third- party verification sources with respect to the particular security or in the particular jurisdiction of the issuer, and a variety of other factors. Users of Fitch's ratings and reports should understand that neither an enhanced factual investigation nor any third-party verification can ensure that all of the information Fitch relies on in connection with a rating or a report will be accurate and complete. Ultimately, the issuer and its advisers are responsible for the accuracy of the information they provide to Fitch and to the market in offering documents and other reports. In issuing its ratings and its reports, Fitch must rely on the work of experts, including independent auditors with respect to financial statements and attorneys with respect to legal and tax matters. Further, ratings and forecasts of financial and other information are inherently forward-looking and embody assumptions and predictions about future events that by their nature cannot be verified as facts. As a result, despite any verification of current facts, ratings and forecasts can be affected by future events or conditions that were not anticipated at the time a rating or forecast was issued or affirmed. The information in this report is provided "as is" without any representation or warranty of any kind, and Fitch does not represent or warrant that the report or any of its contents will meet any of the requirements of a recipient of the report. A Fitch rating is an opinion as to the creditworthiness of a security. This opinion and reports made by Fitch are based on established criteria and methodologies that Fitch is continuously evaluating and updating. Therefore, ratings and reports are the collective work product of Fitch and no individual, or group of individuals, is solely responsible for a rating or a report. The rating does not address the risk of loss due to risks other than credit risk, unless such risk is specifically mentioned. Fitch is not engaged in the offer or sale of any security. All Fitch reports have shared authorship. Individuals identified in a Fitch report were involved in, but are not solely responsible for, the opinions stated therein. The individuals are named for contact purposes only. A report providing a Fitch rating is neither a prospectus nor a substitute for the information assembled, verified and presented to investors by the issuer and its agents in connection with the sale of the securities. Ratings may be changed or withdrawn at any time for any reason in the sole discretion of Fitch. Fitch does not provide investment advice of any sort. Ratings are not a recommendation to buy, sell, or hold any security. Ratings do not comment on the adequacy of market price, the suitability of any security for a particular investor, or the tax-exempt nature or taxability of payments made in respect to any security. Fitch receives fees from issuers, insurers, guarantors, other obligors, and underwriters for rating securities. Such fees generally vary from US$1,000 to US$750,000 (or the applicable currency equivalent) per issue. In certain cases, Fitch will rate all or a number of issues issued by a particular issuer, or insured or guaranteed by a particular insurer or guarantor, for a single annual fee. Such fees are expected to vary from US$10,000 to US$1,500,000 (or the applicable currency equivalent). The assignment, publication, or dissemination of a rating by Fitch shall not constitute a consent by Fitch to use its name as an expert in connection with any registration statement filed under the United States securities laws, the Financial Services and Markets Act of 2000 of the United Kingdom, or the securities laws of any particular jurisdiction. Due to the relative efficiency of electronic publishing and distribution, Fitch research may be available to electronic subscribers up to three days earlier than to print subscribers. For Australia, New Zealand, Taiwan and South Korea only: Fitch Australia Pty Ltd holds an Australian financial services license (AFS license no. 337123) which authorizes it to provide credit ratings to wholesale clients only. Credit ratings information published by Fitch is not intended to be used by persons who are retail clients within the meaning of the Corporations Act 2001

Our Standards:The Thomson Reuters Trust Principles.
0 : 0
  • narrow-browser-and-phone
  • medium-browser-and-portrait-tablet
  • landscape-tablet
  • medium-wide-browser
  • wide-browser-and-larger
  • medium-browser-and-landscape-tablet
  • medium-wide-browser-and-larger
  • above-phone
  • portrait-tablet-and-above
  • above-portrait-tablet
  • landscape-tablet-and-above
  • landscape-tablet-and-medium-wide-browser
  • portrait-tablet-and-below
  • landscape-tablet-and-below