Citigroup Inc. joined JPMorgan Chase & Co. in posting its lowest revenue since the height of 2008’s financial crisis as trading slumped. Wells Fargo & Co.’s revenue slid less as core lending businesses improved.
Citigroup said fourth-quarter revenue fell 7 percent from a year earlier to $17.2 billion. Net income declined 11 percent to $1.17 billion as trading revenue dropped 37 percent, excluding accounting adjustments, and investment banking tumbled 45 percent.
Concern that the European debt crisis would lead to a global economic slowdown curbed trading volume and investment-banking deals in the year’s second half. Wells Fargo, which relies least on trading among the six biggest U.S. banks, said a focus on loans helped soften the blow, with revenue down 4 percent to $20.6 billion. It had a record fourth-quarter profit.
“The banks with capital markets are ugly,” said James Reynolds, chief executive officer of Loop Capital Markets LLC, on Bloomberg Television. “Fundamental banking looks OK.”
Citigroup fell 6.8 percent to $28.66 as of 12:37 p.m. in New York, the worst performance in the 24-company KBW Bank Index. Wells Fargo, based in San Francisco, advanced 1.3 percent to $29.98. New York-based JPMorgan declined 2.2 percent to $35.12.
U.S. banks’ revenue growth in 2011 was probably the slowest since the Great Depression and is unlikely to improve in 2012, Mike Mayo, an analyst at CLSA Ltd., said on Bloomberg Television last month. JPMorgan, the nation’s largest bank by assets, said last week that revenue fell 18 percent to $21.5 billion.
Citigroup’s revenue was the lowest since the fourth quarter of 2008, excluding a charge it took in the last period of 2009 tied to its repayment of government bailout funds. The New York-based bank said today it would eliminate about 5,000 employees, with about 25 percent coming from the securities and banking business. It had disclosed plans last month to cut 4,500 jobs.
Wells Fargo, the largest U.S. bank by market value, boosted net income 20 percent to $4.11 billion, beating analysts’ estimates. Total commercial loan balances rose 7.3 percent from the year-earlier period to $345.5 billion, while consumer loans held on balance sheet fell 2.5 percent to $424.2 billion. The bank also set aside less money for soured loans than a year earlier and said it will continue seeking profits in residential real estate, even after the U.S. housing collapse.
“We like the mortgage business,” Wells Fargo Chairman and Chief Executive Officer John Stumpf said today on a conference call to discuss results. “We have been taking share in that business. For two-thirds of Americans it’s the most significant financial asset they’ll have.”
Capital to Shareholders
Stumpf, 58, reduced his staff by 3 percent to 264,200 and reaffirmed plans to trim $1.5 billion in quarterly costs by the end of this year. The bank plans on “returning even more capital to our shareholders,” he said.
Citigroup’s earnings slump capped a year for CEO Vikram Pandit, 55, in which the shares slid 44 percent amid concern troubled European countries would default.
The firm’s revenue from trading stocks and bonds fell 9.8 percent, including accounting adjustments, from the same period in 2010. Earnings also declined as the company sold unwanted assets, and expenses rose 4 percent to $12.9 billion amid a push to expand emerging-markets businesses.
Citigroup’s fourth-quarter results have missed analysts’ estimates in five consecutive years, according to data compiled by Bloomberg. For all quarters since 2004, Citigroup has beaten estimates 54 percent of the time, compared with the 68 percent average of 22 banks in the Standard & Poor’s 500 Index. Only 43 companies in the S&P, including two lenders, have worse negative-surprise records.