Citigroup Inc fourth-quarter profit fell 11 percent and missed Wall Street estimates as the European debt crisis batteredcapital markets, hurting trading revenue and discouraging clients from doing deals.
Citi's results show how investment banking units are dragging down profits for large Wall Street firms, and portend a tough fourth quarter for others such as Goldman Sachs Group Inc and Morgan Stanley, which report their results later this week.
In contrast, banks that focus more on business and consumer lending are doing better as the U.S. economy shows some signs of recovery. Wells Fargo & Co beat analysts' earnings estimates on Tuesday, helped by improving credit quality and loan growth.
This trend was also reflected last week in the results of JPMorgan Chase & Co.
"Clearly, the macro environment has impacted the capital markets and we will continue to right-size our businesses to match the environment," Citigroup Chief Executive Vikram Pandit said in a statement.
Citigroup stock dropped 3 percent in premarket trading after the results.
The third-largest U.S. bank by assets reported net income of $1.16 billion, or 38 cents per share, down from $1.31 billion, or 43 cents per share, a year earlier.
Analysts, on average, expected a profit of 49 cents a share, according to surveys by Thomson Reuters I/B/E/S. Estimates were high as 76 cents a share two weeks ago.
Money manager Jeffrey Sica, president of SICA Wealth Management, an independent wealth manager based in Morristown, New Jersey, which has bet against a basket of bank stocks, said Citi's earnings miss was "horrendous" in light of how much estimates had come down.
"It's a very negative sign for banks in general," said Sica.
Citi said securities and banking revenue fell 29 percent from a year earlier, excluding the accounting impact of changes in the value of the bank's debt.
The profit drop came despite a lower provision for bad loans: down 41 percent to $2.9 billion.
(Reporting by David Henry in New York; Additional reporting by Lauren LaCapra; editing by John Wallace)
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