Higher Credit Loss Allowances, Provisions Hit Citigroup's Personal Banking, Wealth Results

Editorial Staff

18 April 2023

The personal banking and wealth management arm of , which includes its private banking business, logged a year-on-year slump in net income of 74 per cent to $489 million in the first three months of 2023, affected by a year-on-year change in allowances for credit losses and rising credit losses, while operating costs also rose. Revenues of $6.4 billion, rose 9 per cent.

Global wealth management revenues, at $1.8 billion, fell by 9 per cent, driven by investment product revenue “headwinds” and higher interest rates paid on deposits, particularly in the private bank. The US group said its PBWM higher costs of $4.3 billion were fuelled by investments in transformation, and risk and control investments.

Net credit losses for Q1 stood at $1.094 billion, against $691 million a year before; net allowances for credit losses (ACL) build were $501 million in the quarter, against a net release a year ago of $1.064 billion. In recent years, gyrations in provisions and net releases – linked to the pandemic – have affected banks' headline results, often significantly. On an underlying basis, however, changes have been far less dramatic.

Private bank revenues fell 27 per cent year-on-year to $567 million in Q1, Citigroup said. Citigold revenues rose 4 per cent to $996 million, and Wealth at Work revenues rose 5 per cent, to $193 million.

The North American banking industry has been buffeted in recent weeks by the collapse of Silicon Valley Bank, with worries also stoked by the demise of Zurich-listed Credit Suisse and its takeover, at the behest of the Swiss authorities, by UBS. Results so far from firms in Q1 have shown that higher interest rates have widened interest margins, but difficult market conditions have dragged performance.

Group results
Across the entire bank, Citigroup reported net income for Q1 2023 of $4.6 billion, or $2.19 per diluted share, on revenues of $21.4 billion. This compares with net income of $4.3 billion, or $2.02 per diluted share, on revenues of $19.2 billion for the first quarter of 2022. Revenues rose 12 per cent from the prior-year period and 6 per cent excluding the divestiture-related impacts, as growth in net interest income was partially offset by lower noninterest revenues. (The divestitures refer to how the US bank has been spinning off more than a dozen retail banking businesses outside the US as part of a strategic pivot to areas such as wealth management.)

Citigroup said it had a Common Equity Tier 1 capital ratio of 13.4 per cent at the end of March, rising from 11.4 per cent a year before. Its leverage ratio was 5.9 per cent. (The leverage ratio is a measure which allows for the assessment of institutions’ exposure to the risk of excessive leverage.)