Citigroup Inc.’s shares drop, earnings miss analyst estimates

The third-biggest bank by assets in the U.S. – Citigroup Inc. announced that it has managed to more than double its fourth-quarter net income to 2.7 billion dollars. However, it missed the analyst estimates, due to the fact that mortgage banking and fixed-income trading collapsed.

Currently the bank is dealing with the same difficulties associated with fixed income, commodities and currencies trading, which other banks have been going through. The drop off in mortgage refinance activity also had a great impact on the banks activities. Some of them, such as Wells Fargo & Co and Bank of America Corp. succeeded to compensate the slowdowns by depending on other parts of the business or shifting their focus on different products.

Citigroup Inc.s revenue fell to 17.8 billion dollars in the fourth quarter of 2013, which is 1% less than the one reached during the same period of 2012. The fourth-quarter fixed-income trading revenue of the bank fell to 2.3 billion dollars. It is 15% down compared to the one a year ago, and also 16% down from the third quarters revenue.

The Chief Financial Officer of Citigroup – John Gerspach explained that the declined was a result of lower client activity, particularly when it comes to the credit and spread-related securities. He also said: “Its not that weve got something thats broken and needs to be fixed. This environment we faced in the fourth quarter was very similar to the environment in the third quarter.” Mr. Gerspach also believes that the company is not “struggling to manage the shift” to new home loans away from refinancing.

This week Citigroup Inc. became the fifth bank in the U.S. that reported earnings. Two of the other four banks – JPMorgan Chase and Co. and Goldman Sachs Group Inc. announced that their profit declined, and the other two – Wells Fargo & Co. and Bank of America Corp. reported their profits increased compared to the ones in 2012.

The analyst estimates amounted to 95 cents per share, while the banks earnings reached only 82 cents per share, excluding the impact of a change in the value of the banks own debt. The Chief Executive of the Citigroup Inc. – Michael Corbat – said: “Although we didnt finish the year as strongly as we would have liked, we made substantial progress toward our key priorities in 2013.”

According to CNN Money, the current share price of Citigroup Inc. is 4.35% down, and its one-year return rate is 0.94% up. The 27 analysts offering 12-month price forecasts for Gitigroup Inc. have a median target of 61.00, with a high estimate of 68.00 and a low estimate of 47.20. the median estimate represents a +15.97% increase from the last price of 52.60.