New York Citigroup Inc. today reported net income for the first quarter 2017 of $4.1 billion, or $1.35 per diluted share, on revenues of $18.1 billion. This compared to net income of $3.5 billion, or $1.10 per diluted share, on revenues of $17.6 billion for the first quarter 2016.
Revenues increased 3% from the prior year period, driven by growth in both the Institutional Clients Group (ICG) and Global Consumer Banking (GCB), partially offset by lower revenues in Corporate / Other primarily due to the continued wind down of legacy assets. Net income of $4.1 billion increased 17%, driven by the higher revenues and lower cost of credit. Earnings per share of $1.35 increased 23% from $1.10 per diluted share in the prior year period, driven by the growth in net income and a 6% reduction in average diluted shares outstanding. These results were impacted by episodic items recorded in Corporate / Other described below, which on a net basis benefitted earnings by roughly $0.08 per share in the first quarter 2017.
In the discussion throughout the remainder of this press release, percentage comparisons are calculated for the first quarter 2017 versus the first quarter 2016, unless otherwise specified.
Citigroup revenues of $18.1 billion in the first quarter 2017 increased 3%, driven by a 16% increase in ICG, as well as a 1% increase in GCB, partially offset by a 40% decrease in Corporate / Other due to the continued wind down of legacy assets. Excluding the impact of foreign exchange translation7, Citigroup revenues increased 4%.
Citigroup's net income increased to $4.1 billion in the first quarter 2017, primarily driven by higher revenues and lower credit costs, as expenses remained largely unchanged. Citigroup's effective tax rate was 31% in the current quarter compared to 30% in the first quarter 2016.
Citigroup's operating expenses were largely unchanged at $10.5 billion in the first quarter 2017. In constant dollars, operating expenses increased by 1%, mainly driven by higher performance-related compensation and higher business volumes, mostly offset by lower repositioning costs, as investments were largely funded through efficiency savings.
Citigroup's cost of credit in the first quarter 2017 was $1.7 billion, a 19% decrease, largely driven by a loan loss reserve release of $77 million, compared to a build of $233 million in the prior year period driven by energy-related exposures in ICG. A decline in the provision for benefits and claims and a modest decline in net credit losses also contributed to the lower cost of credit.
Citigroup's allowance for loan losses was $12.0 billion at quarter end, or 1.93% of total loans, compared to $12.7 billion, or 2.07% of total loans, at the end of the prior year period. Total non-accrual assets declined 11% from the prior year period to $5.5 billion. Consumer non-accrual loans declined 18% to $3.0 billion. Corporate non-accrual loans increased 1% to $2.3 billion but were down 3% from the prior quarter.
Citigroup's end of period loans were $629 billion as of quarter end, up 2% from the prior year period. In constant dollars, Citigroup's end of period loans also grew 2%, as 8% growth in GCB and 3% growth in ICG was partially offset by the continued wind down of legacy assets in Corporate / Other.
Citigroup's deposits were $950 billion as of quarter end, up 2%. In constant dollars, Citigroup deposits were up 3%, driven by a 4% increase in GCB deposits and a 3% increase in ICG deposits, slightly offset by a decline in Corporate / Other deposits.
Citigroup's book value per share was $75.86 and tangible book value per share was $65.94, each at quarter end, representing a 6% and 5% increase respectively. At quarter end, Citigroup's Common Equity Tier 1 Capital ratio was 12.8%, up from 12.3% in the prior year period, driven primarily by earnings partially offset by capital return. Citigroup's Supplementary Leverage Ratio for the first quarter 2017 was 7.3%, down from 7.4% in the prior year period, as an increase in Tier 1 Capital was more than offset by an increase in Total Leverage Exposure. During the first quarter 2017, Citigroup repurchased approximately 30 million common shares and returned a total of approximately $2.2 billion to common shareholders in the form of common share repurchases and dividends.
Global Consumer Banking
GCB revenues of $7.8 billion increased 1%. In constant dollars, revenues increased 3%, driven by a 2% increase in North America GCB and a 3% increase in international GCB.
GCB net income decreased 16% to $1.0 billion, as the higher revenues were more than offset by higher cost of credit. Operating expenses were largely flat at $4.4 billion, and increased 1% in constant dollars, driven by the addition of the Costco portfolio, volume growth and continued investments, partially offset by ongoing efficiency savings and lower repositioning costs.
North America GCB revenues of $4.9 billion increased 2%, with higher revenues in Citi-branded cards partially offset by declines in retail services and retail banking. Citi-branded cards revenues of $2.1 billion increased 13%, reflecting the addition of the Costco portfolio and modest organic growth, offset by the impact of day count. Citi retail services revenues of $1.6 billion were down 5% driven by the absence of gains on the sales of two portfolios sold in first quarter 2016. Retail banking revenues declined 3% mainly due to lower mortgage revenues partially offset by growth in average loans, deposits and assets under management.
North America GCB net income was $627 million, down 25%, driven by higher cost of credit and higher operating expenses, partially offset by the higher revenues. Operating expenses increased 3% to $2.6 billion, primarily driven by the addition of the Costco portfolio, volume growth and continued investments, partially offset by efficiency savings and lower repositioning costs.
North America GCB cost of credit increased 33% to $1.4 billion. The net loan loss reserve build in the first quarter 2017 was $159 million, compared to a build of $79 million in the prior year period, largely supporting volume growth. Net credit losses of $1.2 billion increased 28%, driven by the Costco portfolio acquisition, organic volume growth and seasoning, and the impact of changes in collection processes in the cards businesses.
International GCB revenues were largely unchanged at $2.9 billion. In constant dollars, revenues increased 3%. On such basis, revenues in Latin America GCB of $1.2 billion increased 4%, driven by growth in retail loans and deposits, as well as improved deposit spreads, partially offset by lower cards revenues. Revenues in Asia GCB of $1.7 billion increased 3%, driven by improvement in cards and wealth management revenues, partially offset by lower retail lending revenues.
International GCB net income increased 4% to $375 million. In constant dollars, net income increased 12%, driven by the higher revenue and lower expenses, partially offset by higher credit costs. Operating expenses decreased 3% on a reported basis and were 1% lower versus the prior year period in constant dollars. Credit costs decreased 1% on a reported basis and increased 6% in constant dollars. On such basis, the net loan loss reserve build was $24 million, compared to $2 million in the prior year period, net credit losses decreased by 1% and the net credit loss rate was 1.58% of average loans, increasing from 1.55% in the prior year period.
Institutional Clients Group
ICG revenues of $9.1 billion increased 16%, driven by both Banking and Markets and Securities Services revenues.
Banking revenues of $4.4 billion increased 13% (including gain / (loss) on loan hedges)8. Excluding gain / (loss) on loan hedges in Corporate Lending, Banking revenues of $4.5 billion increased 14%. Treasury and Trade Solutions (TTS) revenues of $2.1 billion increased 9%, reflecting strong fee growth, higher volumes and improved spreads. Investment Banking revenues of $1.2 billion were up 39% versus the prior year period. Advisory revenues increased 8% to $246 million, debt underwriting revenues increased 39% to $733 million, and equity underwriting revenues nearly doubled to $235 million. Private Bank revenues increased 9% to $744 million, driven by loan and deposit growth and improved spreads. Corporate Lending revenues of $434 million declined 3% (excluding gain / (loss) on loan hedges) on lower average volumes.
Markets and Securities Services revenues of $4.8 billion increased 18%. Fixed Income Markets revenues of $3.6 billion in the first quarter 2017 increased 19%, driven by both rates and currencies as well as spread products. Equity Markets revenues of $769 million increased 10%, driven by an improvement in derivatives. Securities Services revenues of $543 million decreased 3% driven by prior period divestitures; however, excluding the divestitures, revenue increased 12% driven by higher deposit balances and growth in assets under custody.
ICG net income of $3.0 billion increased 61%, driven by the higher revenues and lower cost of credit partially offset by higher operating expenses. ICG operating expenses increased 1% to $4.9 billion, as higher performance-based compensation was partially offset by lower repositioning costs and a benefit from foreign exchange translation. ICG cost of credit was a net benefit of $205 million, compared to a cost of $390 million in the prior year period. ICG cost of credit included net credit losses of $25 million ($211 million in the prior year period) and a net loan loss reserve release of $230 million (net loan loss reserve build of $179 million in the prior year period largely for the energy-related exposures). The improvement in cost of credit was driven by net ratings upgrades and continued stability in commodity prices.
ICG average loans grew 2% to $302 billion. In constant dollars, average loans increased 3%.
ICG end of period deposits increased 2% to $620 billion. In constant dollars, end of period deposits grew 3%.
Corporate / Other
Corporate / Other revenues of $1.2 billion decreased 40% from the prior year period, driven by legacy asset run-off and divestiture activity, as well as lower revenue from treasury-related hedging activity. The current quarter revenue included approximately $750 million of gains on asset sales which more than offset a roughly $300 million charge related to the previously announced exit of Citigroup's U.S. mortgage servicing operations. As of the end of the first quarter 2017, Corporate / Other assets were $96 billion, 23% below the prior year period and 7% below the prior quarter, primarily reflecting the continued wind down of legacy assets.
Corporate / Other net income was $92 million, compared to $450 million in the prior year period, reflecting the lower revenue, partially offset by lower operating expenses and lower cost of credit. Corporate / Other operating expenses declined 11% to $1.1 billion, primarily driven by the wind-down of legacy assets, partially offset by approximately $100 million of episodic expenses related to the exit of Citigroup's U.S. mortgage servicing operations.
Corporate / Other cost of credit was $52 million compared to $170 million in the prior year period. Net credit losses declined 43% to $81 million, reflecting the impact of ongoing divestiture activity as well as continued improvement in the North America mortgage portfolio, and the provision for benefits and claims declined by $59 million to $1 million reflecting lower insurance-related assets. The net loan loss reserve release was largely unchanged.
Citigroup will host a conference call today at 11:30 a.m. (ET). A live webcast of the presentation, as well as financial results and presentation materials, will be available at http://www.citigroup.com/citi/investor. Dial-in numbers for the conference call are as follows: (866) 516-9582 in the U.S. and Canada; (973) 409-9210 outside of the U.S. and Canada. The conference code for both numbers is 32140614.
Citi, the leading global bank, has approximately 200 million customer accounts and does business in more than 160 countries and jurisdictions. Citi provides consumers, corporations, governments and institutions with a broad range of financial products and services, including consumer banking and credit, corporate and investment banking, securities brokerage, transaction services, and wealth management.
Additional information may be found at www.citigroup.com | Twitter: @Citi | YouTube: www.youtube.com/citi | Blog: http://blog.citigroup.com | Facebook: www.facebook.com/citi | LinkedIn: www.linkedin.com/company/citi
Additional financial, statistical, and business-related information, as well as business and segment trends, is included in a Quarterly Financial Data Supplement. Both this earnings release and Citigroup's First Quarter 2017 Quarterly Financial Data Supplement are available on Citigroup's website at www.citigroup.com.
Certain statements in this release are "forward-looking statements" within the meaning of the rules and regulations of the U.S. Securities and Exchange Commission (SEC). These statements are based on management's current expectations and are subject to uncertainty and changes in circumstances. These statements are not guarantees of future results or occurrences. Actual results and capital and other financial condition may differ materially from those included in these statements due to a variety of factors, including the precautionary statements included in this release and those contained in Citigroup's filings with the SEC, including without limitation the "Risk Factors" section of Citigroup's 2016 Annual Report on Form 10-K. Any forward-looking statements made by or on behalf of Citigroup speak only as to the date they are made, and Citigroup does not undertake to update forward-looking statements to reflect the impact of circumstances or events that arise after the date the forward-looking statements were made.
Press: Mark Costiglio (212) 559-4114
Investors: Susan Kendall (212) 559-2718
Fixed Income Investors: Thomas Rogers (212) 559-5091
1Citigroup's total expenses divided by total revenues.
2Preliminary. Return on average tangible common equity (RoTCE) excluding deferred tax assets (DTAs) is a non-GAAP financial measure. The amount that is excluded from average tangible common equity represents the average net DTAs excluded for purposes of calculating Citigroup's Common Equity Tier 1 (CET1) Capital under full implementation of the U.S Basel III rules. For the components of the calculation, see Appendix A.
3Preliminary. Citigroup's CET1 Capital ratio, which reflects full implementation of the U.S. Basel III rules, is a non-GAAP financial measure. For the composition of Citigroup's CET1 Capital and ratio, see Appendix C.
4Preliminary. Citigroup's Supplementary Leverage Ratio (SLR), which reflects full implementation of the U.S. Basel III rules, is a non-GAAP financial measure. For the composition of Citigroup's SLR, see Appendix D.
5Citigroup's payout ratio is the sum of common dividends and common share repurchases divided by net income available to common shareholders. For the components of the calculation, see Appendix A.
6Preliminary. Citigroup's tangible book value per share is a non-GAAP financial measure. For a reconciliation of this measure to reported results, see Appendix E.
7Results of operations excluding the impact of foreign exchange translation (constant dollar basis) are non-GAAP financial measures. For a reconciliation of these measures to reported results, see Appendices A and B.
8Hedges on accrual loans reflect the mark-to-market on credit derivatives used to hedge the corporate accrual loan portfolio. The fixed premium cost of these hedges is included in (netted against) the core lending revenues. Results of operations excluding the impact of gain / (loss) on loan hedges are non-GAAP financial measures.