Citigroup reports 26% drop in fourth-quarter profit

The logo of Citi bank is pictured at the exhibition hall in Bangkok, Thailand on May 12, 2016. Jan 14 Reuters -- Citigroup Inc. C.N reported a 26% drop in fourth-quarter profit on Friday after reporting some of the financial bruises required for its current restructuring.

The bank said that it had depressed its financial results by $1.1 billion in after-tax expenses due to the divestitures of consumer banking businesses outside the United States.

The lender has shedding the last of its non-U. Chief Executive Officer Jane Fraser, who took over the helm in March, started S. consumer businesses as part of a strategy refresh. Operating expenses were up 18% from a year ago with the charges but still up 8% for its ongoing businesses.

In the past few quarters, it has spent more to fix issues identified in its controls systems, leading to questions from investors about how much money and time the remedies will require.

The bank said this week it would wind down its huge consumer bank in Mexico and earlier on Friday announced the sale of its retail arms in Indonesia, Malaysia, Thailand and Vietnam to Singapore-based lender United Overseas Bank UOBH.SI.

Fraser said that the decision on the Mexico business is the last big move to come from the new strategy, which will focus more on Citigroup's institutional businesses.

Fraser told analysts that the vision for Citi is to be the pre-eminent bank for institutions with cross-border needs, as well as to be a global leader in wealth, a major player in consumer payments and lending in the home market. She said it's been simplified, more focused.

The rise in costs of Citigroup has been due to a battle for talent in Wall Street that has prompted global banks to offer perks like higher pay and bonuses.

Chief Financial Officer Mark Mason said that there was a lot of pressure in what one has to pay to attract talent, and we have seen some pressure on that, according to a post-earnings call with reporters.

The bank's profit fell to $3.2 billion, or $1.46 per share, in the quarter ended December 31, from $4.3 billion, or $1.92 per share a year ago.

The company's shares fell by as much as 3.5% in early trading, but they decreased losses after CFO Mason confirmed that company would resume share buybacks as planned.

The stock was down 1.2% on Friday.

Citi suspended buybacks in the fourth quarter to build capital ahead of a charge for shutting down Korea's consumer business and the impact of a new rule on capital for derivatives risk.

The bank earned a profit of $1.99 per share, excluding Asia divestitures. According to Refinitiv IBES, analysts on average had expected a profit of $1.38 per share.

Its global consumer banking revenue dropped 6% as holders of Citi-branded credit cards in North America paid down their card balances, denying it interest income.

Payment rates have picked up, which is good, but we have to see that materialize into average interest-earning balances, which means payment rates have to normalize, Mason said.

Treasury and Trade Solutions' revenue, which is generally considered Citigroup's strongest corporate business, was down 1% due to low interest rates.

The bank's net interest income NII was flat year-over-year at $10.82 billion, as borrowing from corporations stayed flat. The bank's basic lending business outside markets increased NII by 0.6%.

The net interest margin, which measures what Citigroup pays for money and earns from loans and securities, has declined to 1.98% from 2.06% a year ago.

The bank's investment banking business posted a 43% jump in revenue during the quarter.

Wall Street peers JPMorgan Chase Co JPM.N and Wells Fargo Co also reported results on Friday, with their profits comfortably beating consensus estimates.