Citigroup share price down, profits hit by legal costs

Citigroup Inc reported on Thursday that its fourth-quarter performance was hurt by a decline in trading revenue and a previously announced legal charge.

Net income fell 86% to $350 million in the three months ended December 31, after a $3.5 billion deduction in legal and restructuring charges. During the same quarter of 2013, Citigroup stated a net income of $2.5 billion. Earnings per share stood at $0.06, down from $0.77 a year earlier.

Citi warned in December that the legal charges would significantly hurt results and leave the bank only “marginally profitable”. After the announcement, analysts projected $0.10 earnings per share.

Revenue for the quarter was the same as a year ago at $17.81 billion, but down compared to expectations of $18.55 billion.

The bank stated a 14% decline in trading revenue to $2.46 billion, CEO Michael Corbat estimated in December that Citis trading revenue would fall 5% in the last quarter of 2014.

Revenue from equity trading also took a hit and stood a $471 million, 3% down compared to last year. Citi said the results were driven by weaker revenue in cash equities from Europe, the Middle East and Africa.

Fixed-income trading revenue fell 16% year-on-year during the quarter to $2 billion, driven by “difficult trading conditions in spread products as well as a challenging macroeconomic environment that impacted the rates business,” Citi said.

The robust dollar also hurt Citis revenue, lowering results by $458 million due to unfavorable exchange rates.

Expenses jumped 17% mostly due to the significant legal and restructuring charge reported in the quarter. Citi, among other US and non-US large lenders, settled allegations that bank traders rigged the London interbank offered rate(Libor) and manipulated the forex market.

Mr. Corbat said in a statement that despite the below-expectations results, Citi made significant progress on its top priorities.

“During the year, we increased our market share among our target institutional clients, grew our core loan book, and improved both our net interest revenue and margin from 2013 levels,” Mr. Corbat added.

Citigroup Inc lost 3.71% on Thursday and closed at $47.23. in New York, marking a one-year decrease of 14.11%. The company is valued at $148.60 billion. On Friday the stock fell 0.83% to $46.84 at 8:01 GMT during after-hours trading.

According to the Financial Times, the 24 analysts offering 12-month price targets for Citigroup Inc have a median target of $60.00, with a high estimate of $73.00 and a low estimate of $51.00. The median estimate represents a 27.04% increase from the last close price.