Citigroup's transaction services net income fell 11 per cent, to $776 million, in the fourth quarter of 2011 versus the same quarter last year on the back of narrow spreads and widening expenses. A 14 per cent increase in operating expenses to $1.5 billion reflected investment spending, severance and legal and related charges. Compared to the third quarter of 2011, net income fell 13 per cent.
Regionally, Latin American operations saw the biggest drop in revenue of 7 cent to $411 million quarter-on-quarter, while revenue in Asian operations increased 3 per cent year-on-year to $748 million, still a 1 per cent drop from the previous quarter. EMEA saw a 4 per cent drop to $858 million and North America dropped 3 per cent to $604 million when compared to the previous quarter. Year-on-year the two regions saw a lift of 2 per cent and 3 per cent respectively.
Transaction Services revenues were $2.6 billion, up 2 per cent from the prior year period, driven largely by 7 per cent year-on-year growth in Treasury and Trade Solutions (TTS), which was partially offset by a 10 per cent decline in revenues in Securities and Fund Services (SFS).
TTS revenue growth reflected strong growth in average assets, while the decline in SFS revenues reflected lower volumes, reduced spreads and the impact of foreign exchange.
Transaction Services average deposits and other customer liabilities balances grew 4 per cent year-on-year to $368 billion, and assets under custody fell 1 per cent to $12.5 trillion. The decline in assets under custody was largely related to the impact of foreign exchange.
Overall, Citigroup net income was down 11 per cent to $1.2 billion compared to the previous quarter although full year net income did rise.
Vikram Pandit, Citi’s CEO, said, "Overall, we made solid progress in 2011. We increased our net income to $11.3 billion, up 6 per cent from the previous year, and reached key benchmarks in our consumer businesses, showing our strategy is achieving results. Clearly, the macro environment has impacted the capital markets and we will continue to right-size our businesses to match the environment. With Citi Holdings assets at 12 per cent after the transfer of retail partner cards to Citicorp, we are increasingly focused on driving earnings through our core franchise and beginning to return capital to our shareholders this year."
The majority of the revenue decline in 2011 was driven by the ongoing reduction in Citi Holdings assets, to the tune of $90 billion during the year to come in at $269 billion. Citi Holdings 2011 revenues declined 33 per cent to $12.9 billion. Citicorp revenues for 2011 were $64.6 billion, down 2 per cent, or $1 billion, from 2010 as revenue growth in Regional Consumer Banking (RCB) and Transaction Services was offset by declines in Securities and Banking revenues.
