Breaking News

EU Agrees to Curbs on Russian Banks, Export of Some Technology
Tweet TWEET

Fitch: Citi's 4Q Demonstrates NIM Stabilty, Core Results Still Lackluster

  Fitch: Citi's 4Q Demonstrates NIM Stabilty, Core Results Still Lackluster

Business Wire

CHICAGO -- January 17, 2013

Fourth-quarter reported net income improved significantly on a sequential
basis, but core results were somewhat disappointing with core revenues lower,
and provision and core expenses higher during the quarter, according to Fitch
Ratings.

Reported revenues in 4Q'12 reflect drags from DVA/CVA ($485 million), while
last quarter's one-time items included DVA/CVA charges ($776 million) and the
significant charge related to the incremental sale of the MSSB joint venture
($4.7 billion). Adjusting for these and other significant items, Citi had core
revenues of approximately $18.7 billion, down 4% on a linked-quarter mainly
due to seasonally lower fixed income revenues, and to a lesser extent, a
decline in North America Consumer Banking revenues. That said FICC revenues
were up 58% from a year ago.

Positively, Citi reported NIM expansion sequentially (up 7bps) and from a year
ago (3bps) counter to many in the industry. Citi attributed this to active
balance sheet management, and Citi expects to keep the margin relatively
stable in 2013.

In terms of other one-time items in 4Q'12, Citi also reported repositioning
charges related to workforce reductions ($1 billion), and like many other
banks, a charge to settle the Independent Foreclosure Reviews (IFR, $305
million). Backing out these and the aforementioned non-core items that
impacted revenues, Fitch estimates that Citi's fourth-quarter adjusted pre-tax
return on assets (ROA) of 0.6% declined from the 0.9% figure reported in the
third quarter despite a smaller balance sheet. The pre-tax ROA declined
sequentially mainly due to lower revenues and higher provision (up 16%
sequentially) and core expenses (up 2.4% on a linked quarter basis).

Citi reported a somewhat smaller reserve release than expected. With one of
the highest reserves to loans and continuing improvements in asset quality
trends, the reserve release was just $142 million during the quarter, as
compared to $1.5 billion last quarter. Fitch views the conservative reserve
release favourably given still elevated nonperforming asset levels, inclusive
of high balances of accruing troubled debt restructurings.

Citi continues to make progress in bringing down noncore assets. Although Citi
Holdings asset now comprise just 8% of consolidated total assets, the drag to
earnings was still $1 billion during the quarter, which included the IFR
settlement. As Fitch acknowledged in its October 2012 affirmation, the pace of
reduction in noncore assets will likely slow going forward. Still, we expect
the negative earnings impact of Citi Holdings to remain a drag on overall
results in future periods.

Citi's capital ratios continued to strengthen with further progress on the
Basel III front. Citi's estimated Tier I common ratio of 12.7% (under Basel I)
will likely continue to compare favourably to the average of the four largest
U.S. banks. Under Basel III, Citi's estimated Tier I common ratio improved to
8.7% from 7.2% a year ago.

Additional information is available at 'www.fitchratings.com'.

ALL FITCH CREDIT RATINGS ARE SUBJECT TO CERTAIN LIMITATIONS AND DISCLAIMERS.
PLEASE READ THESE LIMITATIONS AND DISCLAIMERS BY FOLLOWING THIS LINK:
HTTP://FITCHRATINGS.COM/UNDERSTANDINGCREDITRATINGS. IN ADDITION, RATING
DEFINITIONS AND THE TERMS OF USE OF SUCH RATINGS ARE AVAILABLE ON THE AGENCY'S
PUBLIC WEBSITE '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.

Contact:

Fitch Ratings
Julie Solar
Senior Director
Financial Institutions
+1 312 368-5472
Fitch Inc.
70 West Madison
Chicago, IL 60602
or
Christopher Wolfe
Managing Director
Financial Institutions
+1 212 908-0771
or
Media Relations:
Brian Bertsch, +1-212-908-0549 (New York)
brian.bertsch@fitchratings.com