Citi Increases Loss Reserves, Enhances Digital Capabilities

Citigroup reported underwhelming first-quarter results on Wednesday (April 15) as the coronavirus continues to shake the global economy, announcing an approximately $5 billion increase in loan-loss reserves and digital enhancements despite the crisis.

CEO Michael Corbat said on the company’s earnings call that “although we did have good revenue performance this quarter, we exited the quarter in a dramatically different environment. While we’ve built significant loan loss reserves, no one knows what the severity or longevity of the virus’s impact on the global economy will be.” The company’s increased loan-loss reserves also reflected the Day 2 impact of the new CECL accounting standard.

CFO Mark Mason said the impact of the COVID-19 pandemic has only been felt in North America for a few weeks, but the bank has harnessed its experience in Asia to inform its response strategy here. For example, Mason noted that Citi was one of the U.S. banks to provide assistance to impacted clients, beginning in early March. The firm has “since expanded that support and continues to evaluate whether additional support is needed,” he said.

Mason added that enhancements the bank has made to its digital capabilities have prepared it to “better respond and continue serving our customers as they manage through this crisis.” He said digital deposit sales remain “strong” at $1.6 billion this quarter, while mobile adoption rose 13 percent year over year.

Citi has also made changes to let clients use self-service channels for additional transactions, such as boosting limits for ATM withdrawals. It’s also continued to roll out new digitally led value propositions such as Citi Wealth Builder.

In terms of headline numbers, Citi reported that first-quarter earnings came in at $2.4 billion, or $1.05 per diluted share. That was slightly ahead of the $1.04 per share that analysts had estimated, but far under the $1.87 per share ($4.7 billion total) that the bank earned in the same quarter last year.

First-quarter revenue totaled $20.7 billion vs. the $19 billion analysts had expected. Loan reserves rose higher by $4.9 billion.

The overall report disappointed Wall Street despite the bank’s earnings beat, sending Citi shares tumbling 5.6 percent to close at $42.86.