Citigroup Inc. — Q1 2024 Form 10-Q
Reporting period: Three months ended March 31, 2024. Comparisons below are generally against Q1 2023 unless noted. Amounts are U.S. dollars.
Business context and results
Citi operates through Services, Markets, Banking, U.S. Personal Banking (USPB) and Wealth; other activities are reported in All Other. Management described improved performance in several businesses alongside continued transformation and legacy-business exits.
| Metric | Q1 2024 | Prior comparable period |
|---|---|---|
| Revenue, net of interest expense | $21.1 billion | $21.4 billion; down 2% reported |
| Revenue excluding divestiture-related impacts (non-GAAP) | $21.1 billion | Up 3% |
| Net interest income | $13.5 billion | $13.3 billion; up 1% |
| Operating expenses | $14.2 billion | $13.3 billion; up 7% |
| Provisions for credit losses and benefits/claims | $2.4 billion | $2.0 billion; up 20% |
| Net income attributable to Citigroup | $3.4 billion | $4.6 billion; down 27% |
| Diluted earnings per share | $1.58 | $2.19 |
| Efficiency ratio | 67.3% | 62.0% |
| Net interest margin (taxable-equivalent basis) | 2.42% | 2.41% |
The reported revenue comparison was affected by the prior-year India consumer-business sale gain (approximately $1.06 billion pretax). Excluding divestiture-related impacts, revenue growth reflected Banking, USPB and Services, partly offset by Markets and Wealth declines. The effective tax rate was approximately 25% in both periods.
Segments and material changes
- Services: Revenue rose 8% to $4.8 billion; net income rose 15% to $1.5 billion, supported by Treasury and Trade Solutions and Securities Services.
- Markets: Revenue fell 7% to $5.4 billion and net income fell 25% to $1.4 billion, principally due to weaker Fixed Income rates and currencies activity; Equity Markets revenue increased 5%.
- Banking: Revenue increased 49% to $1.7 billion and net income was $536 million versus $55 million. Investment banking issuance activity improved; reported results also benefited from lower loan-hedge losses.
- USPB: Revenue increased 10% to $5.2 billion, but net income decreased 14% to $347 million as credit costs rose. Card loan growth supported revenue; card losses increased as pandemic-era vintages matured.
- Wealth: Revenue decreased 4% to $1.7 billion and net income decreased 6% to $150 million. Higher investment fees partly offset lower deposit spreads and higher mortgage funding costs.
- All Other, managed basis: Net loss was $457 million versus net income of $198 million, reflecting higher expenses, lower Corporate/Other revenue and lower tax benefits.
Balance sheet, credit, capital and liquidity
- Total assets were $2.43 trillion; end-of-period loans were $675 billion, up 3% year over year. Deposits were $1.307 trillion, down 2% year over year, mainly reflecting lower Services deposits amid quantitative tightening.
- Long-term debt was $285.5 billion, up 2% year over year; short-term borrowings were $31.9 billion. Citi redeemed or repurchased approximately $9.4 billion of long-term debt during the quarter.
- Net credit losses were $2.3 billion, up 77% year over year. Consumer net credit losses rose 67% to $2.1 billion; corporate net credit losses increased to $164 million from $22 million. Total allowance for credit losses on loans and unfunded commitments was $19.9 billion.
- Standardized Basel III CET1 ratio was 13.45%, above the 12.3% required ratio. Supplementary Leverage Ratio was 5.84%. Citi stated that it exceeded applicable capital requirements and was well capitalized.
- Average liquidity coverage ratio was 117%; available liquidity resources at quarter-end were approximately $965 billion. Citi reported compliance with the Net Stable Funding Ratio rule.
- Book value per common share was $99.08 and tangible book value per share was $86.67. Return on tangible common equity was 7.6%, down from 10.9% a year earlier.
Cash flows from continuing operations were a net use of $10.8 billion in operating activities, compared with a $30.5 billion use in Q1 2023; investing activities provided $14.8 billion and financing activities provided $12.4 billion. These bank cash flows include substantial balance-sheet and trading-related movements and should not be read as conventional free cash flow.
Outlook, management commentary and risks
- Citi expects full-year 2024 net credit loss rates to be higher in both Branded Cards and Retail Services; management said the expected losses on outstanding March 31 balances were reflected in the allowance.
- Citi expects additional repositioning costs during the remainder of 2024. Q1 expenses included $258 million of repositioning costs, $225 million of net restructuring charges and a $251 million incremental FDIC special-assessment charge. Expenses excluding divestiture impacts and the incremental assessment (non-GAAP) increased 5% year over year.
- Citi expects to complete separation of its Mexico consumer, small-business and middle-market operations in the second half of 2024 and plans an IPO in 2025. Wind-downs of consumer operations in Korea, China and Russia continue; the Poland consumer-business sale process has restarted.
- Management cited elevated rates and inflation, recession risk, geopolitical conflicts, China-related uncertainty, market volatility and regulatory change as risks to clients, funding costs, credit costs and results. If finalized as proposed, U.S. Basel III capital changes could materially increase Citi’s required regulatory capital.
- Russia exposure was approximately $7.0 billion, including $4.6 billion of client dividends held at Russia’s Deposit Insurance Agency and restricted from remittance. A loss-of-control event could require recognition of an approximately $1.6 billion cumulative translation loss and a $0.6 billion loss on intercompany liabilities.
- Citi’s net investment in Argentina was approximately $1.6 billion, including approximately $0.9 billion of net peso exposure. Currency controls and limited hedging liquidity could lead to further translation losses.
- For litigation and other matters where a material loss was reasonably possible but not accrued, Citi estimated aggregate reasonably possible unaccrued losses of up to approximately $1.2 billion. Management said the ultimate outcome of disclosed matters was not expected to materially adversely affect consolidated financial condition, while noting possible material effects on results or cash flows in individual periods.
- Citi stated an intention to maintain a quarterly common dividend of at least $0.53 per share, subject to conditions and Board approval. Repurchases will be assessed quarterly in light of regulatory-capital uncertainty.
Key facts for investors to verify
- Whether card delinquencies, net losses and allowance coverage continue to rise as pandemic-era loan vintages mature.
- Whether underlying revenue growth and expense savings offset restructuring, repositioning and FDIC assessment costs.
- Progress and economics of the Mexico separation and IPO, and remaining Asia and Poland exits.
- Capital headroom and potential effects of regulatory changes on distributions and repurchases.
- Developments affecting restricted Russia funds, Argentina currency exposure, and litigation or regulatory contingencies.