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-Citigroup on Friday reported a $1.8 billion loss for the fourth quarter as it recorded charges to refill a government deposit insurance fund and carry out a sweeping internal reorganization. CEO Jane Fraser called the results “very disappointing,” but expects this year to be a turning point. “We made substantial progress simplifying Citi and executing our strategy in 2023,” she said in a statement. Fraser has rolled out a multi-year effort to cut bureaucracy, increase profits and boost a stock that has lagged peers. The third-largest U.S. lender by assets posted a loss of $1.16 per share for the three months ended Dec. 31. The results were eroded by $3.8 billion in combined charges and reserves that Citigroup disclosed in a filing on Wednesday. The loss was also fueled by the bank stockpiling money to cover currency risks in Argentina and Russia. Revenue slid to $17.4 billion in the quarter from a year earlier.It was the first time Citigroup broke out earnings for its five businesses — services, markets, banking, U.S. personal banking and wealth, which were previously housed under broader divisions.Revenue from markets, or the trading division, dropped 19% to $3.4 billion from a year earlier. It was dragged lower by a 25% plunge in fixed income revenue, which included some losses from Argentina. In contrast, banking revenue climbed 22% to $949 million, led by higher investment banking fees that offset a slide in corporate lending. In U.S. personal banking, revenue climbed 12% to $4.9 billion, lifted by retail banking and credit cards.Services revenue grew 6% to $4.5 billion and wealth management revenues fell 3% to $1.7 billion. Citi’s 2023 revenue rose to $78.5 billion from a year earlier. Still, its net income fell to $9.2 billion, compared with a year earlier.Chief Financial Officer Mark Mason said last month that Citi expects to complete its overhaul in the first quarter of 2024. The lender aims to reduce annual expenses to a range of $51 billion to $53 billion. In November, Citi announced fresh leadership changes after saying it will reduce management layers to eight from 13. Under the new structure, the leaders of Citi’s five major businesses will report directly to the CEO. It will also cut regional leadership role outside North America. The lender’s stock climbed 13.7% in 2023, compared with a/an xx% rise in the S&P 500 Banks Index, which tracks major bank stocks. Still, Citi’s shares underperformed the benchmark S&P 500, which gained about 24.2%. Rivals JPMorgan Chase (NYSE:JPM) and Bank of America on Friday reported lower quarterly profits, while Wells Fargo outperformed on cost cuts. More

FRANKFURT (Reuters) – A backlog of incomplete deals and an uncertain economic outlook mean German dealmakers are predicting a quiet first quarter and a relative fee famine until 2025 in Europe’s biggest economy.Financial and legal advisers point to a darker macroeconomic outlook for Germany, which saw four deals totalling $113 million in the first 10 days of 2024, compared with 45 deals worth $876 million in the same period last year, Dealogic data shows. Europe too has made a slower start, with 71 deals totalling $2.2 billion, down from 375 worth almost $9 billion in the same period of 2023.”The economic challenges facing Germany are likely to lead to a quieter Q1,” said Bernd Egbers, partner at Astera Legal, adding that private equity funds and companies are likely to be more cautious about making big acquisitions.In signs of the mounting challenges for Germany, farmers this week staged nationwide protests, coupled with disruptive rail strikes across the country, and corporate insolvencies increasing significantly at the end of 2023.Late last year, the German government froze major spending pledges focused on green initiatives and industry after a constitutional court ruling on unused pandemic emergency funds blew a 60 billion euro ($65 billion) hole in its finances. This hit investor confidence, with business morale worsening in December, according to the Ifo institute. German industrial production also fell unexpectedly in November, the sixth monthly decline in a row.”Entering 2024 with such low M&A volumes, we do not anticipate so much more activity in the coming year, with a pick-up to take greater effect in 2025,” said Rainer Langel, Head of Europe, Middle East and Africa, at Macquarie Capital.This comes as dealmakers globally had expected a pick-up in activity as conditions improved. In the U.S. so far this year, deal value amounted to $56 billion, boosted by activity in the healthcare sector and more than double the amount it saw at the start of 2023 with $24 billion, according to Dealogic data.Germany led M&A by value for continental Europe in 2023, with $91 billion of transactions, Dealogic data shows. However, that was the lowest since 2015. And last year globally M&A volumes fell to their lowest levels in a decade.For bankers and other advisers, that all means lower fees.Net investment banking revenue from M&A in Germany was 159 million euros in the fourth quarter of 2023, down 95% versus the same period the year prior, Dealogic data shows.And since the pandemic, transactions have taken longer, leading to longer periods before they close, advisers say.”While there will be more activity in 2024, the gap between signing and closing a deal takes time, so many of these deals will only be finished in 2025,” said Langel.As ever with M&A, fortunes could change quickly if a series of deals emerges. Late last year, Adnoc raised a preliminary offer for German chemicals company Covestro, valuing it at 11.3 billion euros ($12.38 billion). The private equity backers of pharmaceuticals company Stada are preparing for an initial public offering or sale that could value it at ten billion euros ($11 billion), while Bayer (OTC:BAYRY) has said it is considering splitting its consumer health or crop science divisions. Cash-rich private equity firms with deep contact books could be the ones to get M&A going again, some dealmakers said.”(They) have a history of adapting to changing economic conditions, and based on their experience they are likely to find ways to continue pursuing deals even in a challenging environment,” said Egbers.Like others, Egbers is confident of a pick-up in deal activity during the second half of the year if the economy stabilises, inflation slows and interest rates fall.($1 = 0.9130 euros) More

The largest U.S. lender has benefited from its acquisition of failed First Republic Bank (OTC:FRCB) in May that brought in billions of dollars of loans and bolstered its net interest income (NII) – the difference between what banks make on loans and pay out on deposits.The bank said it expects full-year net interest income (NII) of $90 billion. That was higher than estimates of $86.2 billion, according to LSEG data. In the quarter, NII rose 19% to a record of $24.2 billion.CEO Jamie Dimon said the U.S. economy continued to be resilient and markets were expecting a soft landing, but sounded a note of caution on inflation and interest rates.”There is also an ongoing need for increased spending due to the green economy, the restructuring of global supply chains, higher military spending and rising healthcare costs. This may lead inflation to be stickier and rates to be higher than markets expect,” Dimon said.Profit for the fourth quarter was $9.31 billion, or $3.04 per share, for the three months ended Dec. 31, the bank said on Friday. That compares with $11.01 billion, or $3.57 per share, a year earlier. Annual earnings hit a record $49.6 billion.The bank reported a 12% jump in revenue to $38.57 billion.JPMorgan and several major banks are taking a hit to their quarterly profits as they are required to pay a bulk of the $16 billion to replenish the Federal Deposit Insurance Corporation’s deposit insurance fund (DIF), which was drained after Silicon Valley Bank and Signature Bank (OTC:SBNY) failed last year. More

The brokerage expects rate cuts of 25 basis points per quarter from there.”The UK will be the last of the major central banks to start the cutting cycle and it is likely to move slower, at least compared with the ECB (European Central Bank),” BofA economists wrote in a note. More

LONDON (Reuters) -The oil price surged on Friday, as the escalating conflict in the Red Sea region threatened to further disrupt global trade, while stocks rose in light of U.S. inflation data that reinforced investors’ view that interest rates could soon fall.Oil rose by 4% after the United States and Britain said they had launched strikes from the air and sea against Houthi military targets in Yemen in response to the group’s attacks on ships in the Red Sea, a dramatic regional widening of the Israel-Hamas war in Gaza.Brent futures were last up 4% at $80.52 a barrel, while U.S. West Texas Intermediate (WTI) crude rose 4.1% to $74.99.”Oil prices have climbed sharply following the attacks, with Brent Crude now around 7% higher since early December, before Houthi rebels began targeting ships in the Red Sea,” Susannah Streeter, head of money and markets at Hargreaves Lansdown, said.”Reports coinciding with the UK/US military action suggest the British government is modelling scenarios which could see prices rise by $10 a barrel, if the Red Sea crisis continues, with gas prices at risk of going up by 25%,” she added.Meanwhile, global stocks rallied, underpinned by the prospect of a drop in interest rates. The MSCI All-World share index was up 0.2%, reflecting a bounce in Europe, where the STOXX 600 rose 0.7%, led partly by a rally in shares of aerospace and defence companies, where the sector index hit a record high.U.S. stock futures fell 0.2%, while government bond yields edged lower, reflecting demand among investors for safe-haven assets. The dollar rose against a basket of major currencies, as did gold, which benefited from investor risk aversion, rising 0.9% to $2,046 an ounce. Other classic safe-havens such as the Swiss franc held mostly steady, a situation that some analysts said could change.”If we see a massive escalation of the situation … then the traditional flight-to-safety will see U.S. Treasuries, safe-haven currencies like yen and Swiss franc benefit.” said Khoon Goh, head of Asia research at ANZ in Singapore. STELLAR NIKKEIIn Asia, Japan’s Nikkei extended its impressive gains so far this year, jumping 1.5% to another 34-year high, helped by solid results from Fast Retailing Co, owner of clothing brand Uniqlo. Chinese inflation data showed the country’s economic recovery remained weak in December, with the consumer price index falling 0.3% from a year ago. However, separate trade data showed exports rose at a faster than expected clip last month while imports returned to growth. Data on Thursday showed U.S. consumer prices rose more than expected in December, with a closely watched core measure coming in slightly above consensus. However, the details of the report showed that pressures picked up in specific pockets of the consumer market, such as energy and the cost of used cars, as well as other seasonal factors that should abate, according to economist Mohit Kumar at Jefferies.”Our view remains that for the Fed to cut rates aggressively they need to either see the economy falling off a cliff or a sharp fall in inflation. And we do not see either scenario,” he said in a morning note.Fed officials drew few new conclusions from the data. Richmond Fed President Thomas Barkin said it did little to clarify the path of inflation. Futures showed traders are attaching a 73% probability of a rate cut by March, compared with 68% a day earlier. They are also pricing in around 150 basis points (bps) of easing this year.Treasuries held steady after a powerful rally in the shorter-dated bonds overnight. The two-year yield was virtually unchanged at 4.27%, having fallen 11 basis points overnight, as was the 10 year at 3.98%.Euro zone government bonds drew in flows, pushing the yield on the benchmark 10-year German Bund down 4 bps to 2.165%.Adding some support in the European bond market were comments from European Central Bank (ECB) President Christine Lagarde who said rate cuts could happen if the central bank had certainty that inflation had fallen to its 2% target. More

(Reuters) -Wells Fargo’s fourth-quarter profit jumped as the lender benefited from cost cuts, but it warned that 2024 net interest income could be 7% to 9% lower than a year earlier, sending its shares down 1.8% before the bell.As the Federal Reserve raised interest rates, banks benefited by charging borrowers more on interest. With market participants forecasting rate cuts this year, banks’ interest income could start to erode.”Our business performance remains sensitive to interest rates and the health of the U.S. economy, but we are confident that the actions we are taking will drive stronger returns over the cycle,” CEO Chief Executive Officer Charlie Scharf said in a statement. Conversely, lower rates could tempt more consumers to take out loans, boosting another key source of income for banks. Revenue in the fourth quarter rose 2% to $20.5 billion. Net income rose to $3.45 billion, or 86 cents per share, for the three months ended Dec. 31, the lender said on Friday. That compares with $3.16 billion, or 75 cents per share, a year earlier. Non-interest expense dropped 2.5% in the quarter.Wells Fargo is among a group of banking giants that are required to refill a government insurance fund that was drained of $16 billion after three regional lenders collapsed.It paid $1.9 billion in special assessment fees to the regulator. Wells Fargo is still operating under an asset cap that prevents it from growing until regulators deem it has fixed problems from a fake accounts scandal. The bank has nine open consent orders from regulators mandating additional oversight of its practices.OFFICE LOANS WEAKNESSMeanwhile, the bank raised its provisions to prepare for souring loans to $1.28 billion. Office loans have been a cause for concern. The rise in remote and hybrid work has spurred more vacancies, making it harder for building owners to pay back their loans. Increases in the provision for credit losses was driven by credit card and commercial real estate (CRE) loans, the bank said. The allowance also included higher net loan charge-offs for commercial real estate office and credit card loans.Wells Fargo has in the recent quarters said it has shored up capital to absorb potential losses from commercial real estate. The bank saw a $284 million increase in CRE net loan charge-offs in the fourth quarter.In December, CEO Scharf told investors that the bank expects to book higher-than-anticipated severance expenses between $750 million to a little less than $1 billion in the fourth quarter. The bank incurred severance expenses of $969 million, or 20 cents per share. More