Citigroup posted an US$18 billion quarterly loss on Tuesday because of charges related to a new US tax law, but its adjusted earnings beat Wall Street expectations and management signaled that the bank may soon lift financial performance targets.
The law, signed by president Donald Trump last month, has made fourth-quarter earnings a messy ordeal for big banks. It forces them to take one-time hits on earnings held abroad and changes the treatment of deferred tax assets, both of which affect Citigroup in particular.
However, banks and other large US corporations expect to benefit greatly from lower taxes and other provisions in the new law over the long term.
Citigroup, the fourth-largest US lender, stands to gain less than peers because it already earns about half of its profits in lower-tax countries abroad. Even so, it expects its tax rate to fall to about 25 per cent this year from 30 per cent in 2017. That could save the bank billions of dollars over the next few years.
The changes will not only boost Citigroup's profits, but allow the bank to generate higher returns and generate more capital, chief executive Michael Corbat said. The new law might also stimulate economic growth because it incentivises companies to invest in their businesses and has led to wage hikes that could help consumers, he said.
"Tax reform is a clear net positive for Citi and its shareholders," Corbat said on a conference call with analysts.
Management is now examining financial performance targets set before the tax law changes to see whether they should be lifted, chief financial officer John Gerspach said on a separate call with journalists.
Based on the tax savings alone, Citigroup expects to generate a return on tangible common equity of 10.5 per cent this year, 12 per cent next year and 13 per cent in 2020, higher than previous forecasts. That metric is closely watched by Wall Street as a gauge of how much profit a bank can generate from shareholder money.
Executives also expect inflation to boost Citigroup's net interest income as the US Federal Reserve continues to lift rates this year. For every 25 basis points the Fed lifts rates, Citi should generate another $80 million of revenue, Gerspach said.
Citigroup shares rose 0.4 per cent to $77.12 in morning trading.
Lagging competitors in growth and not earning its cost of capital, Citigroup's valuation has not kept up with rivals like JPMorgan Chase and Bank of America Corp. Investors and analysts have been pushing Citigroup to prove it can grow revenue and profits as a second act to shrinking and returning capital.
The bank already plans to return at least $60bn worth of capital to investors through stock buy-backs and dividends, a target executives reiterated on Tuesday.
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Excluding the tax issues, which led to $22bn in charges, its fourth-quarter earnings were boosted by growth in consumer banking, especially in Asia and Mexico.
Its adjusted net income rose 4 per cent to $3.7bn, or $1.28 per share, compared with analysts' average estimate of $1.19 per share, according to Thomson Reuters I/B/E/S.
Total revenue rose 1.4 per cent to $17.26bn and was slightly better than estimates of $17.22bn.
Citigroup's institutional business, which includes investment banking and trading, fell 1 per cent due to weakness in trading that has also affected Wall Street peers.
Bond trading revenue fell 18 per cent due to ongoing weakness in volatility, while equity markets revenue was down 23 per cent because of $130m worth of losses on a derivatives trade with one client.
The client is troubled South African furniture retailer Steinhoff International, a source familiar with the matter told Reuters. Other lenders, including JPMorgan Chase, also have exposure to Steinhoff, which has been embroiled in an accounting scandal.
In reports on Tuesday morning, several analysts said Citi's results were modestly ahead of Wall Street's best guess and that they were more focused on whether the bank would lift performance targets.
"Results could prove 'good enough' this quarter," Instinet analyst Steven Chubak wrote in a note to clients.
Citigroup's results follow JPMorgan and Wells Fargo last week. Bank of America and Goldman Sachs plan to report fourth-quarter results on Wednesday, with Morgan Stanley expected to report on Thursday.
Key facilities
- Olympic-size swimming pool with a split bulkhead for multi-use configurations, including water polo and 50m/25m training lanes
- Premier League-standard football pitch
- 400m Olympic running track
- NBA-spec basketball court with auditorium
- 600-seat auditorium
- Spaces for historical and cultural exploration
- An elevated football field that doubles as a helipad
- Specialist robotics and science laboratories
- AR and VR-enabled learning centres
- Disruption Lab and Research Centre for developing entrepreneurial skills
The National's picks
4.35pm: Tilal Al Khalediah
5.10pm: Continous
5.45pm: Raging Torrent
6.20pm: West Acre
7pm: Flood Zone
7.40pm: Straight No Chaser
8.15pm: Romantic Warrior
8.50pm: Calandogan
9.30pm: Forever Young
The smuggler
Eldarir had arrived at JFK in January 2020 with three suitcases, containing goods he valued at $300, when he was directed to a search area.
Officers found 41 gold artefacts among the bags, including amulets from a funerary set which prepared the deceased for the afterlife.
Also found was a cartouche of a Ptolemaic king on a relief that was originally part of a royal building or temple.
The largest single group of items found in Eldarir’s cases were 400 shabtis, or figurines.
Khouli conviction
Khouli smuggled items into the US by making false declarations to customs about the country of origin and value of the items.
According to Immigration and Customs Enforcement, he provided “false provenances which stated that [two] Egyptian antiquities were part of a collection assembled by Khouli's father in Israel in the 1960s” when in fact “Khouli acquired the Egyptian antiquities from other dealers”.
He was sentenced to one year of probation, six months of home confinement and 200 hours of community service in 2012 after admitting buying and smuggling Egyptian antiquities, including coffins, funerary boats and limestone figures.
For sale
A number of other items said to come from the collection of Ezeldeen Taha Eldarir are currently or recently for sale.
Their provenance is described in near identical terms as the British Museum shabti: bought from Salahaddin Sirmali, "authenticated and appraised" by Hossen Rashed, then imported to the US in 1948.
- An Egyptian Mummy mask dating from 700BC-30BC, is on offer for £11,807 ($15,275) online by a seller in Mexico
- A coffin lid dating back to 664BC-332BC was offered for sale by a Colorado-based art dealer, with a starting price of $65,000
- A shabti that was on sale through a Chicago-based coin dealer, dating from 1567BC-1085BC, is up for $1,950
How much sugar is in chocolate Easter eggs?
- The 169g Crunchie egg has 15.9g of sugar per 25g serving, working out at around 107g of sugar per egg
- The 190g Maltesers Teasers egg contains 58g of sugar per 100g for the egg and 19.6g of sugar in each of the two Teasers bars that come with it
- The 188g Smarties egg has 113g of sugar per egg and 22.8g in the tube of Smarties it contains
- The Milky Bar white chocolate Egg Hunt Pack contains eight eggs at 7.7g of sugar per egg
- The Cadbury Creme Egg contains 26g of sugar per 40g egg
Tips for job-seekers
- Do not submit your application through the Easy Apply button on LinkedIn. Employers receive between 600 and 800 replies for each job advert on the platform. If you are the right fit for a job, connect to a relevant person in the company on LinkedIn and send them a direct message.
- Make sure you are an exact fit for the job advertised. If you are an HR manager with five years’ experience in retail and the job requires a similar candidate with five years’ experience in consumer, you should apply. But if you have no experience in HR, do not apply for the job.
David Mackenzie, founder of recruitment agency Mackenzie Jones Middle East
More on Quran memorisation:
At a glance
Global events: Much of the UK’s economic woes were blamed on “increased global uncertainty”, which can be interpreted as the economic impact of the Ukraine war and the uncertainty over Donald Trump’s tariffs.
Growth forecasts: Cut for 2025 from 2 per cent to 1 per cent. The OBR watchdog also estimated inflation will average 3.2 per cent this year
Welfare: Universal credit health element cut by 50 per cent and frozen for new claimants, building on cuts to the disability and incapacity bill set out earlier this month
Spending cuts: Overall day-to day-spending across government cut by £6.1bn in 2029-30
Tax evasion: Steps to crack down on tax evasion to raise “£6.5bn per year” for the public purse
Defence: New high-tech weaponry, upgrading HM Naval Base in Portsmouth
Housing: Housebuilding to reach its highest in 40 years, with planning reforms helping generate an extra £3.4bn for public finances
In-demand jobs and monthly salaries
- Technology expert in robotics and automation: Dh20,000 to Dh40,000
- Energy engineer: Dh25,000 to Dh30,000
- Production engineer: Dh30,000 to Dh40,000
- Data-driven supply chain management professional: Dh30,000 to Dh50,000
- HR leader: Dh40,000 to Dh60,000
- Engineering leader: Dh30,000 to Dh55,000
- Project manager: Dh55,000 to Dh65,000
- Senior reservoir engineer: Dh40,000 to Dh55,000
- Senior drilling engineer: Dh38,000 to Dh46,000
- Senior process engineer: Dh28,000 to Dh38,000
- Senior maintenance engineer: Dh22,000 to Dh34,000
- Field engineer: Dh6,500 to Dh7,500
- Field supervisor: Dh9,000 to Dh12,000
- Field operator: Dh5,000 to Dh7,000
Specs
Engine: Duel electric motors
Power: 659hp
Torque: 1075Nm
On sale: Available for pre-order now
Price: On request
Killing of Qassem Suleimani
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The White Lotus: Season three
Creator: Mike White
Starring: Walton Goggins, Jason Isaacs, Natasha Rothwell
Rating: 4.5/5
