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Citigroup profit drops on higher expenses

Citigroup Inc reported a 26% slump in fourth-quarter profit. This is because it took a hit from higher expenses and weakness at its consumer banking unit. The Wall Street bank has incurred higher costs for several quarters to fix the issues regulators identified in its controls systems. Many investors question on how much money and time the remedies will require. The lender is also shedding the last of its consumer businesses outside of the United States. This is as part of a strategy refresh started by Chief Executive Officer Jane Fraser.

Profit fell to $3.2 billion, or $1.46 per share. The drop was driven by an 8% surge in the bank’s operating expenses. This excludes the impact of Asia divestitures. Citigroup had announced in October, that it would exit retail banking operations in South Korea. It had already said that it had agreed to sell its consumer businesses in Indonesia, Malaysia, Thailand and Vietnam to Singapore-based lender United Overseas Bank. The bank has announced their disposal plans for seven of the 13 mostly Asian consumer businesses that Fraser said.

Fraser stated that they have made the final decision related to the refresh of their strategy. Also, it pertains to markets they intend to exit. Excluding the impact of costs stemming from Asia divestitures, the bank had earned $1.99 per share. A profit of $1.38 per share is expected, according to Refinitiv IBES data. The bank’s global consumer banking revenue dropped 6%, hurt by a 3% drop in revenue from Citi-branded credit cards in North America. Because the customers paid down card balances.

Revenue from Treasury and Trade Solutions, generally considered Citigroup’s strongest corporate business, was down 1% due to low interest rates. A bright spot during the quarter was the bank’s investment banking business, which posted a 43% jump in revenue. Total revenue increased 1% from a year earlier to $17 billion. Common Equity Tier 1 is a key capital ratio that rose to 12.2% from 11.7% three months earlier after the bank suspended its fourth-quarter share buyback to build capital ahead of charges for the Korea exit and the impact of a new rule on capital for derivatives risk. Wall Street peers JPMorgan Chase & Co and Wells Fargo & Co also reported results, with their profits comfortably beating consensus estimates.

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