Citigroup has today reported a 46% plunge in quarterly profit as the bank set aside nearly $5 billion to prepare for an expected flood of defaults on loans due to a virtual halt in economic activity caused by the coronavirus pandemic.
The coronavirus outbreak has temporarily shuttered businesses around the globe, put millions out of work in the US alone and is expected to cause the deepest recession in recent memory.
Citigroup, the most global of the US banks, recorded a $4.89 billion expense to increase its reserves against anticipated losses on loans, mainly from its credit cards because of rising unemployment.
Lenders with more exposure to unsecured loans like credit cards are more susceptible to hefty writedowns, as credit card delinquencies have historically risen in lockstep with unemployment.
JPMorgan Chase & Co said yesterday that its profit plunged by more than two-thirds from a year earlier mostly because of $7 billion addition to loan loss reserves, half of which were for credit cards.
JPMorgan and Citigroup are the first and third biggest card issuers, respectively, in the US. Citigroup, unlike JPMorgan, also issues cards under the brand names of retailers including Home Depot, Macy's and Bean.
Citigroup has been leaning on its North America branded cards division to generate the bulk of its consumer banking revenue. The business continued to deliver in the quarter, growing 7% on higher volume.
The blow to earnings was cushioned by higher-than-expected revenue due to a surge in fees as trading desks cashed in on the turbulent markets in February and March. Equities and fixed income trading each jumped 39% each from a year earlier.
Total revenue rose to $20.73 billion, topping Wall Street's forecast of $19 billion, according to Refinitiv data.
Total net income fell to $2.52 billion, or $1.05 per share, in the quarter ended March 31, compared with $4.71 billion, or $1.87 per share, a year earlier. Earnings per share were also boosted by a 10% reduction in shares outstanding.
Analysts on average had expected Citigroup to earn $1.04 per share, according to Refinitiv.
