City profits fall due to recession and layoffs

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Citigroup’s profit fell by more than a third last quarter due to slowing corporate spending, a lack of deals and a costly round of layoffs.

The New York-based bank reported net income of $2.9 billion, down from $4.5 billion in the same period last year. Revenue in the quarter fell 1 percent to $19.4 billion on rising fears of a US recession.

Revenue at Citi’s large cash management and payment processing unit, which provides services to corporations, rose only 15 percent, less than half of the 32 percent increase in the same period last year.

Like its rivals, Citi was not able to avoid a sharp downturn in dealmaking. Revenue from corporate and investment banking fell 44 percent in the quarter, while fees from its markets business — trading stocks and bonds on behalf of clients — fell 13 percent.

Weakness in several of its businesses prompted the bank to announce plans to cut more than 5,000 employees last month. During the quarter, Citi’s expenses increased by more than $1 billion, mostly associated with layoffs.

“Amidst a challenging macroeconomic backdrop, we continue to see the benefits of our diversified business model and strong balance sheet,” Citi Chief Executive Jane Fraser said on Friday. “In banking, the long-awaited boom in investment banking is yet to materialise, making the quarter a disappointment.”

However, the still-resilient American consumer proved to be a bright spot for the City. Revenue from Citi’s retail credit card business soared 27 percent during the period, helping the bank’s overall profits exceed Wall Street expectations.

As the Federal Reserve has signaled its determination to continue raising interest rates to reduce inflation, Citi expects more of its debt to come down. Its provisions for loan losses rose nearly 40 percent to $1.8 billion in the quarter. Its total debt in the quarter was little changed from a year ago.

Deposits remained almost unchanged as compared to the previous quarter. Analysts warned that banks, even large ones, could see deposit outflows this quarter as consumers chase higher-yielding investments.

A decade and a half after the financial crisis, Citi is still struggling to find its footing again. Fraser, who takes over in 2021, has led the bank through restructuring, with Citi exiting underperforming businesses and closing a worldwide retail branch network in an effort to reduce costs.