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Why Citigroup Missed Q4 Sales Estimates

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Q4 2018 performance

Citigroup’s (C) total revenues of $17.1 billion fell short of analysts’ estimate of $17.6 billion. Moreover, total revenues for the quarter also declined on a YoY and sequential basis as challenges in market-sensitive products, especially fixed income, remained a drag. Also, the wind-down of legacy assets further pressured the top line.

Analysts expect the top line of major banks (XLF) to improve in the fourth quarter led by growth in loans and a higher spread. J.P. Morgan Chase (JPM), Bank of America (BAC), and Goldman Sachs (GS) are expected to report YoY improvement in revenues. However, Wall Street expects Wells Fargo’s (WFC) top line to remain subdued.

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Segment performance

The Global Consumer Banking (or GCB) segment’s revenues remained flat as growth in North America was offset by declines in Asia. North America GCB revenues improved 1% YoY driven by growth in Retail Services. Retail Banking revenues, excluding mortgage, saw 5% YoY improvement driven by higher deposit spreads offset in part by lower volumes. Meanwhile, the company’s Branded Cards revenue remained flat as the sale of the Hilton portfolio offset the growth in interest-earning balances. Retail Services rose 6%, driven by an increase in loans coupled with benefits from the L.L.Bean portfolio acquisition.

Latin America GCB revenues remained largely flat. However, on a constant dollar basis, revenues rose 5%, reflecting growth in loans and deposits. Meanwhile, Asia GCB revenues fell 4% YoY owing to the weakness in investment revenues. On a constant currency basis, revenues improved 1% led by growth in deposits, lending, and insurance.

The Institutional Clients Group revenues declined 1% YoY, reflecting lower revenues in its Markets and Securities Service. Banking revenues improved driven by the continued momentum in Treasury and Trade Solutions, Private Bank, and Corporate Lending.

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